4\ -!

Z Journal of S

HARVARD I..AW SCHOOL

A Short Treatise on Fantasy Sports and the Law:

How America Regulates its New National Pastime
Marc Edelmanl

TABLEOFCONTENTS

I. II.

I,rnooucrroN. .. . Tlrr Hsronv on Feuresv Sponm LE,curs

4
4
5

III.
'

A. Bere Fantasy Sports B, A Neu Gne is Creted C. TIte Fira Rosserie Legue Baseball Auction D, Rotisserie Baseball Grows in Porlarity E. Tlte Internet Boon
.

I ll
9

Tue Fexrmv Sponrs lrqoustnv Toolv

Marc Edelman is a member of the faculty at Barry University's Dwayne O.

Andreas School of Law in Orlando, FL and a summer adjunct professor t Fordham University School of Law in New York, NY (Marc@MarcEdelman.com). Professor Edelman earned his B.S. in economics from the r(/harton School (University of Pennsylvania) and both his J.D. and M.,{. from the University of Michigan. !hile at the University of Michigan, Professor Edelman founded the fantasy sports dispute resolution business, SportsJudge.com. In addition, Professor Edelman has served as a legal consultant to various fantasy sports businesses.
a law student

Professor Edelman wishes to thank ,tmit Schlesinger, Erica Cohen, Kristen Chiger and Raleigh \ebber for their research assistance. He also wishes to thank his wife, Rachel Leeds Edelman, for her assistance in developing the concept for a course in Fantasy Sports & the Law, and rhe students in his 2011 seminar on Fantasy Sports & the Law for providing their insights on fantasy sports gaming. Professor Edelman retains full copyright to this article and has agreed to provide the HaruardJoarnal of Sports and Entertainment Lau with an irrevocable license to publish

this work.

Copyright @ 2011 by the President and Fellows of Harvard College.

Electronic copy available at: http://ssrn.com/abstract=1907272

HantardJoarnal of

Sports

& Entertainnent Law I Vol. 3

A.

Different Ty of Fantasy Ganes Different Fantasy Sports

ll
t2
.

B.

l. 2. 3.

Different lVays to Initially Allocate Players Different Season Lengths

Participants

....

tt
I5

Tbe Staeboldrs

I6
r6 t9 2t

IV.

1. 2. 3. 4. ,. 6. 1.

Host Sites Commissioners....

Treasurers

))
2t
25

Strategic Advisors
lnsurers

24

A.

LEcn Rrsxs Fon Fenrlsv Sponrs Hosr SIrrs

State Ganbling l^ut.

26 26 29 30
33

Is Fantasy Sports Illegal Gambling under State Law?..

V.

Is Fantasy Sports Illegal Gambling? (Majority View). 3. Stricter Views Toward Fantasy Sporm 4, Montana's Alternative Test of Fantasy Sports . . . . B. Federl Gambling l-aw.. 1. Interstate Vire ,ct of 196l 2. Illegal Gambling Business Act . .. 3. Professional and Amateur Sports Protection Act 4. Uniform Internet Gambling Act .. C. lntellectual Propaty Iws . 1. Patent Law.. 2. Copyright Law .. 3. Trademark Law.. 4. Right to Publicity Lrcer Rsrs Fon Frnrmv Sponrs Penrlcp,rs. . .. . ... . . A. Criminal Liability ander Ganbling lus B, Ciail Lidbility for Gmbling Aaiabies

2.

34 34
35

36
37

38
38

39

40
42 45

4,
46 46
47

VI.

C. Violating Comany Anti-Solicitation Policies D, Bankrutcy

Lc,r Rrsrs Fon Ar.crrRy FANTAsy Sponrs

VII.

A, B. C, D,

BusrNssrs
Fantasy Sports Tresury Sites Fantasy Sports Adaisors

48

..

48

49

Fantsy Sorts lnsurnce , . , , Fantasy Sporx Dispute Raolution

t1

t2
52

Cor.crusor.

Electronic copy available at: http://ssrn.com/abstract=1907272

2012 / A Short Treatise on Fantasy

Sports and tbe l-aut

I.

INrnopuc'r'roN

America is in the midst of a "fantasy srorts revolttion" that is changing the way sporrs fans interact with one another.' \With m<re chan 30

million Americans playing fantasy srorts, tocay's s1>orts fans srencl as much time predicting the performance of professional athletes as \all Street investors spend predicting stocks and bonds.r Some fantasy sports contests, such as the \l/orlcl Championship of Fantasy Football, charge participanrs entry fees in the thousands of dollars, and offer grand prizes upwards of $300,000.' Meanwhile, other br.rsiness ventures, such as Bloomberg Sports, sell fantasy participants "analytical tools" and "expert advice."6 One insurance carrier, Fantasy Sports Insurance, has even begun to offer fantasy pafticipants insurance policies against injury to their star fantasy players.' Nevertheless, with the rapid and unexpected emergence of fantasy sports, few have devoted time to understanding how U.S. law applies to fantasy sports businesses and their participants. Thus, many have misconceptions about the law of fantasy sports. This article explains how U.S. law regulates the emerging fantasy sports industry. Part I of this article provides an overview of the history of

' Neil;anowitz, Bet on Footltall, DurocRRl'& CHRoN. (Rochester, NY), Sept. 16, 2005, at 128, auailble at 20O5 \LNR 269O0861 ; see aho infra, notes I 59 - 169 and accompanying text. ,i Gene \ang, Fantasy Football Gex Benched, \Wrsn. Posr, May 29,2011, at D3 (estimating about 30 million participants in fantasy football); Tom Van Riper, A Gry's Fdntas!, FoRnrs, Feb. 28, 201I, at 23 (estimated the entire fantasy sports marketplace at 30 million participants).
See generally Fantary Football tVebite Aim to Choose the Best Athletes Uing a Formala Daiued from Wall Street, I Creatrrs re Mot Definitely Bullish on Fantasy Sporx, Ftrt. Su{-Shrl,aL, Aug. 26, 2OO9, ar 1D (drawing comparisons between the selection of fantasy sports teams and investment portfolios).

t ,l Chris Dempsey, Fantar! Reuolion )nline Craze is Intoxicating to Anericau, and Exanding Oatside tlte Sportt tVorld,DrNv. Posr, Sept. 9,2007 , at Bl (describing
Lee, Play

the entry fees and prizes involved in the !orld Series ofFantasy Football); Erick S. Ball!: Subtitating Carrent Federal Non-Regilation of Fantasy Sorts Leagtes witb Linind Superaision of Hya-Conitiue Leagnes, Lov. L.. ENr. L. F.nv. J3,64 (2008) (describing "the rise of hyper-competitive fantasy leagues offering cash prizes as high as S100,000"); Childs \alker, DreanTeans: Tired of Second Grctsing Hou Yoar Faaorite Sporr Clnbs Are Managed? Fantasy l*agau It Yol Tae Charge of tbe Action, THn Barr. SuN, March 6,2006, at lD ("You can find high-stakes national games with top prizes in the hundreds of thousands of dollars.").

6
1

See

See

infra, notes 161 -764 and accompanying text. infra notes 165 - 169 and accompanying rexr.

HaruardJoarnal of Sports t Enerlainntenl lttut

VoL 3

fantasy sports leagues. Part II explores the fantasy srorts indr"rstry t<lclay. Part III explains how U.S. laws apply to fantasy sports host sites. Part IV discusses how U.S. laws apply to fantasy sl)orts participants. Finally, Part V applies U.S. laws to businesses that :rovicle ancillary services to fantasy sports host sites and participants.

II.

Trn Hrsronv

or Far.rnsv Sponrs Lnlcur;s

A.

Before Fantasy Sorts

For the American sports fan, professional sports once meant simply an opportunity to attend games, root for teams, and second-guess "the men who ran [theJ teams."8 Then, in the 1920s, the company Ethan Allen released a "table game" called All-Star Baseball, which allowed baseball fans to simulate team management by choosing a "team" from a collection of player cards and selecting the team's lineup.e Each player's performance in All-Star Baseball was determined by probabilities that were derived from the players' actual past performances, in conjunction with the random event of rotating a spinner over these cards."t For almost forty years, All-Star Baseball v/as seen as the best way for I' Then, in 1961, Hal Richman, a sports fans to simulate ream management. Bucknell University mathematics student, devised a more complex simulation game.r2 Richman's game, Strat-O-Matic Baseball, included one play-

'

Valker, sura note

5.
Sports:

C.B.C. Distribution Coart Got lt'Vrong,58 Cs L. Rav. 223,231 (2007);

e David G. Roberts Jr., Note, The Rigltt of Plicity ancl Fantasy

tVhy the
ee

alo

Tih Play: Peronal Reuieras, Op-Ed Pieces, and Polenics fron Ouride tbe Pwvietu of the Unpiret, NrNr, Sept, 22, 2006, ar 110, auailalle at 2006 \7LNR 24732952.
to

t'
t2

See

Triple Play, snpra note 9.

ld,
See

Yn Riper, sara note 3 at 24; Stuarr Miller, Strat-O-Matic Deulteer Celebrate TIvrs, Feb. 14, 20'll, at D5 ("In his 20s, afer discouragement from his father and rejection from numerous companies, Richman borrowed money from friends and started [Strat-O-Matic] on his own."); Cody Derespina, Strat-OTarningtlteBig5-Ob!, NrvsDay, Feb. 13, 20II,at 73 (funher noting that "Richman began to develop the game as an ll-year-old in 1948 alter becoming dissatisfied with the statistical randomness present in other baseball games of the era. He found that using dice added an element of predictability that jibed with the results of actual ballgames."); Calling All SABR G, N.Y, D,urv Nnvs, Feb. 6, 2011, at 73; Mike James, Extra Base: Strat Stretcha Board Game History to 50 Years, USA Too,rv, Jan. I 1, 20ll , at 8C; Rich Freeman, Strat-)-Matic
Its 50tb Anniaersary, N.Y.

Still

Going,S/roag, TnnNtoN Trvns, Jul. 7, 201O, at B2.

2012

/A

Short Trcatise on Fantasy Sports and the l-atu

League Baseball player.'i Each card c<ntainecl various ratings and result tables that corresponded to dice rolls.''r For each game, Strat-O-Matic participants would select teams and batting orclers, roll

ing card for each Major

the dice, and then review charts to determine game results.'t By the 1980s, many other companies had joined Ethan Allen and StratO-Matic in the simulation sports market, with some companies, such as Micro League Baseball and Avalon Hill, providing their games digitally via the computer.'(' One of the benefits of playing sports simulation games on the computer was the increased range of managerial options.rt However, much like the earlier "table games," the computer sports simulations still had one significant limitation: they did not allow participants to showcase
managerial prowess by predicting future events.'"

B, A New Game is Created

\With both traditional "table games" and "computer
simulation
games" failing to provide sports fans with a way to predict players' future performances, some highly educated sports fans began to experiment with ways of creating sports simulation games that incorporated future events.'e One of the first people to construct a forward-looking baseball simulation game was Bill Gamson, a psychology professor at Harvard University and the University of Michigan.tn Gamson's game, which he called "The Baseball Seminar," included a series of participants who paid a ten-dollar entry

See

Miller, nra note 12,

'a Id.; s also Freeman, sara nore 12; Rob Biertempfe, MLB Q&A: Talking uith Hal Richman, Ptrr. Tnra. Rrv., May 30, 2010, aaailable at 2010 \LNR 11122984. It See Miller, stpra note 12; Biertempfe, sapra note 14. t6 See general Miller, t,tra noie 12 (noting how computer-based simulation
games began

t'

to

replace card-based games).

Micro League Baseball Instructions, http://www.stadium64.com/manuals/

microleaguebaseball,htm (noting that Micro League Baseball participants were able to make players steal bases and bunt). t8 See generally Amorak Huey, Vlhat if Sputs Proaids Strfers uith Dream Matcbas,
Gna.o Raplns Pnnss, Mar. 8, 2O05,arD2 (comparing fantasy sports with simulation

sports games).

Id.
S

Geoffrey T. Hancock,Ilpstaging U.S. Ganing lu: Tbe Potential Fantasy Sport Quagnire and ilte Reality of U.S, Ganbling Io*,31 T. Jrnnrnsox L. Rcv. 317,

20

323 QO08); Sam Allis, Lord of the Garnes: Fantasy Baball Indeltted to Truo Innouators,
Bosro,r Glooe , Mar. 6, 2006, ar A3; Bill Shea, Yer, ThE are Playing Fantsy Sorts at 'Vork, bnt i that Bad? Sone Execatiae Bet Not, CnaIN's Dlnotr Bus. J., Mar. 17, 2008, at 11, available at 2008 (/LNR t4O4899.

Haruard Joat'nal of Sports

& Enteruinuenl ltut

Vol, 3

fee

to "draft" a team of baseball players.'' The winner of Gamson's

ame

was the participant who, over the course of an actual Major Leaguc llascball season, selected players who earned the most points in a pre-determinccl sct

of sraristical categories.tt One of Gamson's "Baseball Seminar" participants was lobert Sklar, a retired reporter for the Los Angeles Tines who, at the time, taught journalism and film studies at the University of Michigan.2J ln 1965, Sklar mentionecl "The Baseball Seminar" to one of his mentees, Daniel Okrent.'1 Almost fifteen years later, while working as a journalist for Texas Monthly, Okrent decided to revive "The Baseball Seminar" as a fun competition amonl some of his journalist and advertising friends." Okrent first proposed the game to his friends in November 1979, over lunch at a now-defunct New York Frenclr bistro, La Rotisserie Francaise." After his friends expressed enthusiasm, Okrent contacted Sklar, who, by this time, was teaching film studies at New Y<rk University's Tisch School of

Hancock, sura note 20; Allis, stpra note 20 (noting that Bill Gamson "Seminar" to redtce any association between it and illegal game ^ gambling). 22 See Hancock, srra note 20; Allis, stpra note 20; Shea, nra note 20.
.1

2f

called

his

S Hancock, snra note 20 at 324. S gnerally \tilliam Grimes, Rol,ert Slr, 74, Historian Vlto P Fihns in Context (Obituary), N.Y. Ttvas, Jul. 12, 2011, at ,t20 (noting that Sklar was best known as a scholar for his 1975 book "Move-Made America," which "was one of the first histories to place Hollywood films in a social and political context, finding them a key to understanding how modern American values and beliefs have been shaped."). 2't See Yan Riper, snra note 3 at 24; Hancock, rilra note 20 at 324; Fdnrdty Baseball's Reality Defia Belief, Drrnolr Nrvs, Apr. 17, 2OO5, ar Cl, aoailaltle at 200t \LNR 2698158. 2t S'$'alker,tilpranoteS;seealso;FantarySportsBornonlgTgFlighttoTexas, Mvnr. Brlcn SuN Nvs (Myrtle Beach, SC), Dec. 18, 2005, at 88, aaailable at 2005 \LNR 20423O98; Dave Cunningham, Still Cooin': Rotiserie Baseball Celebratet itt 20tb Year, Onr. ScrrNEL, Mar. 26,2000, at C10; Brad Townsend, It Began as a Pastine Anong New Yor Linra, Bat Rotierie Baseball Soon tYoand n Firing a a FantasytVoild,Drl'r-. MonNlNc NEvs, Sept. lp, 2003, at lC; Patrick Hruby,The Cate Against Fantsy,orlr, S'asu. Turs, Apr.29,2003, at C1 (describing Daniel Okrent's creation of Rotisserie Baseball on a plane flight from New York, NY to Austin, TX). 26 S Fantary Sorts Born on 1 97 9 F light to Texas, srra note 25 ; e aln Mike Hale, Tlte Fea \Vho Fotnded Fantasy Baeball, N.Y. Tlvns, Apr. 20, 201O, at C4 (describing the role of an inaugural ou/ners meeting at La Rotisserie Francaise); Fred Ferrerti, For Major-League Addict, A lVay to 'V'in a Pennant, N.Y TIuns, July 8, 1p80, at 8.

2J

2012

/ A Short

Treatise on Fantasy Sons and tlte

ltttu

the

\)ith Sklar's helr, Okrent upclatecl che game's rlles ancl announced the founding of the original Rotisserie League.'*

Arts."

C.

Tbe First llotiuerie League aseball Aactiott

In April 1980, Okrent and his friencls returned to tle La Iotisserie

Francaise restaurant, along with Sklar, to concluct the first-ever ll<tisserie League baseball player auction.2" For purposes of this auction, each <lf the league's ten participants posted a #260 entry fee."' Each partici)ant tlen used his $260 entry fee to bid on players from Major Leagr.re Baseball's National League rosters.t'

According to the original Rotisserie Leagr.re rules, each participant earned points based on his selected players' real-life performances in eight statistical categories: four based on hitting, and four on pitching." At the end of the Major League Baseball season, the Rotisserie League participant
See Fantasy Baseballs Reality Defia Belief, sara nore 24 (providing a profile of the original Rotisserie League team owners); Grimes, supra tnte 23 (noting Robert Sklar's appointment by New York University). 28 SaJosh Robbins, Gee, Ganes: Il's Been 25 Yer Since 11 Fan Held the First RotisserieArction,ORt. SnN.rtNeL,Jun.8,2O05,at Dl (disctssing Daniel Okrent's role in creating, and then reshaping, the Rotisserie League rules); rae a/ro Allis, supra note 20 at A6 (describing Sklar as the link betrveen Gamson's Baseball Seminar and Okrent's Rotisserie Baseball). 2e See generally Dan Raley, Liaing in a Fantasy lVorld: Rotiserie Leagnes haue'I'unal Fans into Fanatics, Srarrrc Posr-INrrlltcENcER, Apr. 6, 1996,ar Dl (noting that "Fantasy or Rotisserie League baseball [began with] exactly 1l people in 1980"); s alo Townsend, nra note 25; Ethan Skolnick, lls All G to Than, Pl'tu Bracu Posr, May 16, 1999, at l lB; Ferretti, sara nore 26 at I (noting that the full group of inaugural owners in the Rotisserie League included: "Cork Smith, an editor at Viking and owner of the Smith Coronas; Bruce McCall, an advertising writer, the McCall Collects; Bob Sklar, a film and television critic, the Sklargazers; Tom Guinzberg, former Viking editor, the Burghers; Michael Pollet, a lawyer, the Pollet Burros; Miss Salembier, associate publisher of Ms. magazine; Mr. Fleder, an editor at Esquire; Mr. \Waggoner, an assistant vice president of Columbia University; Mr. Eisenberg, a writer at Esquire, and Dan Okrent, a freelance writer, owner of the O Fenokees, and league commissioner."). ]0 S Skolnick, sapra note 29; Fred Mitchell Rotiserie Baeball lsn't , Jast a Passittg Fantas!, CuI. TnIn., Apr. 11, 1989, at I. r' ,1 Skolnick, sura note 29. t2 Id. (noting the original four hitting categories included runs scored, runs batted in home runs and steals; the original four pitching categories included earned run average, wins, saves and strikeouts); see also Cunningham, silrd note 25; Fer-

2'

rctti, sara note 26,

Harvard Journal of Sports t Enterlainntenl Ltut

Vol. 3

whose team earned the most p<lints would receive a cash prize, as wcll as dousing in the chocolate drink Yoo-Hoo.rl

D.

Rotisserie aseltall Grous

in Poalarity

The original Rotisserie League began "almost as a tongue-in-chcck exercise,"Jo and as an attempt by hard-working New Yorkers to have "some goofy, albeit at times absurdly competitive, fun."" However, becattsc many members of the Rotisserie League were also members of the media, the llotisserie League garnered national attention.,(' Several members of the press published stories about the llotisserie League during its inaugural 1980 season.]7 For example, just four months after the league's inaugural auction, New Yor Tines reporter Fred lerretti published an article that detailed the league's participants and performance.3* Then, a few weeks later, the CBS Morning Nar produced a story on the league.ie Shortly thereafter, members of the Rotisserie League even agreed to publish a book to "introduce the game to the masses."r" As baseball fans came to learn about the Rotisserie League, their game began to develop a cult following among statistically-oriented sports fans.a' Like any new game, different groups added their own nuances to the rules.12
13
,! Cunningham, npra note 25; Skolnick, sara nore 2). J'' s"lker, snra note 5.

It

Townsend, utra note 21,

S

tasy Players

Feran, Bach in the Gane: Major l*agne Baeball'frying to Reattracl FanNelz )nline Formt, Coruvsus DIsr,t.rcH, Apr. 3, 2006, at 2OO6 r(/LNR 5582O02i see alo Hale, snpra note 26 ("Most of those team owners were

t('

Tim

uith

writers, editors or publishers, which guaranteed publicity."). t' See infra notes 38 - 39 and accompanying text. r8 S Ferretti, Jupra note 26 at 8; Townsend, tttra noe 25 at lC. e Townsend, tara note 25 at lC, tn tD'alker, tilpra noce 5, ar lD. rr S Cunnin gham, sura note 25 at C10; see also A Vbole Dffirent Ball Game, ,{TLaNTrc,June l, L985,ar30,auailableat 1985 \ILRN 1370459 (noting that by 1985, the Rotisserie League Baseball ,{ssociation included 157 leagues, across 48 states); Craig Davis, The Paer Tigers: Anericans' Teant Jast Read the Box Score: lt' Not \Vhetber tbry \Vin ' Lose bnt Huu they Played Izst Garne, FLt. Sutt-SntlrtNrL, Mar.22, 1988, at lC (noting that by 1988 there were really 1,000 fantasy baseball leagues in America and 15,000 to 20,000 team owners). 'r2 S Paul lVhite, Fantasy Leagaes Variations Kee Gane Fresb,lJSATooav, Aug. 24,1990, at C6 (discussing various innovations to the Rotisserie League baseball rules that emerged in the 1980s); d Marc Edelman, lYhy Tlte Single Entiry Defense can Neuer Apply n NFL Cls: A Priner on Prcerry Rights Tbeory in Profesional Sports,

2012

/ A Sbort

Treatise on Fantasy Sports and tlte

l-.ttu

fifth statistical category for both batters ancl pitchers.ll Others replaced the player auction with a draft t< sclcct players.'rr Still others replaced the points-based scoring system with a heacl-tohead system in which fantasy team-owners playecl against different fantasy teams each week.at However, even as indiviclual leagr.res adclccl their own nuances, most leagues adopted the original Rotisserie League's core rules.rn These core rules were thereafter adopted into fantasy gamcs revolving
Some early participants added a

around other sports.'r7

E.

Tbe lnternel Boon

By the early lppOs, America was already in the midst of a growing fantasy sports revolution, featuring "[fantasy] magazines, season guides, radio shows, statistical services, management groups, sportswear ancl newsletters."'l* Yet to many, fantasy sports were seen as "activit[ies] for outcasts [and] engaged [in] by those presumed to be overly bookish and socially challenged."ae One of the drawbacks to playing fantasy sports was the

18 Fononu
process

lr:ru. Pnop. MauIa & ENT. LJ. 891, 898 (2008) (noting a similar of moving toward standardized rules also takes place in real sports, such as

professional baseball).
S Cunningham, srpra note 25 at ClO. See generally Valker, snra note 1 at 1D (mentioning the ten-category league format). f'r S Cunningham, snr note 25 at C10; see a/so Frank Clancy, For Rotissetie Baseball Fanatia, A Grand Shan,L.A. Ttvrs, Apr. 30, 1986, at 1 (mentioning, as early as 1986, that some fantasy baseball leagues had moved from an auction to a draft format); \White, utra note 42 ar C6 (also discussing the option of a league

{t

draft).

{t .! Cunningham, supra note 25 at C10; ee also White, iilra r,ote 42 at C6 (noting that by 1990 some fantasy baseball leagues had moved to a head-to-head format); Ed Spaulding, Cbarpentiey't Fantasy Football Digest Now a Real lVinner, Hous. Cnno.,Jul. 21, 1991 ,at 16 (mentioning the head-to-head format of fantasy
sports).

{r'

Spials:

Cunningham, stpra note 25 at C10; cf, Robert Thomas )r., Srts'Vorld A Tean of )ne's Oun, N.Y. Ttues, ,tug. 20, 1984, at C2 (discussing the

creation of a book, formalizing the core rules for Rotisserie baseball).

rs Cunningham, snrd note 25 at C10. {e .S Bo tYorld: Ax ExJ. Bernhard & Vincent H. Eade, Gambling in a Fantasy loratory Study of Rotiserie Baeball Games,9 UNLV GvlNc Rcs. & Rav. J. 2!'
available at 2005'LNR 6724835.

^t ld.

10

Haraard

Jounal of Sports & Entertainnent hut

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amount of paperwork inv<lved in calculating both indiviclual player statistics and team statistics.to Then, in 1994, tbe Internet came along and changed everytling.5r The Internet boom brought a "broad demographic shift in fantasy sports participation"s'because it enabled fantasy sports participants to instantaneously download tabulated statistics.tr Thus, fantasy sports participants no longer needed pads of paper and calculators.ta In addition, the Internet brought participants together from around the globe, whereas before fantasy sports participants had "to scramble to find playmates."tr ith the Internet's facilitation of fantasy sports, by the mid-1990s a number of traditional sports and entertainment companies had begun to enter the online fantasy sports marketplace.tt' The first of these companies to provide fantasy sports games on the web was the Entertainment SPorts Programming Network ("ESPN"), which in 1995 launched its first entirely Internet-based fantasy baseball game.t' By the year 2000, ESPN had ex-

S Dennis Lynch, Softuare Helps Handle Hassfu of Rnnning tt Fntasy Leagte, CHI.Tnln., Sept. 17, 1998,at 7 (explaining that even though millions participate in fantasy sports leagues, "the major drawback of such play has been the paperwork involved," and that "[tJhe process ofcompiling statistics and sending out standings is time-consuming and tedious."). 5t Seeinfra notes 52 - 53andaccompanying rexr;seeaho Nicholas Bamman,Is tlte Dec Stac.ecl Against Internet Ganbling? A Cost-Benefit Analysis of Proowd Regtltion, 19 J.L. & PoL'Y 23I,232 (2010) (noting that Internet gambling today is a $24 billion annual industry, with about 25 percent of revenues derived from the United States); Kevin F. King, Geolocation and Federalin on the lilernel: Cttting lernet Gatnbling's Gordian Knot, ll Coluv. Sct. & Trcn. L. Rv. 4I,71 (2010) (noting that .{mericans today spend roughly $7 billion per year on Internet gambling)'

r0

52 Bernhard & Eade, rr note 49i see also Risa J. \eaver, nline Fntasy Sorn Litigation and tle Nd for a Federal Rigbt of Pablicity Statile,2l0 Durc L. & TacH. Rev. 2, f I (2010) ("This phenomenal growth [in fantasy sports] can be explained in two words: the internet,"); Nicole Davidson, Comment, lnternel Ganbling: Sboald Fantdt! Sorts l*ags Be Prohibited,39 SrN DIrco L. Rrv. 201, 202 (2002). t3 See Fntasy Spat: A Booming Buiness, Mtss. LtNx, Sept. 17, 2003, Bl, aaailable

at

20O3

\LNR

L33654t2.

^t

t4 Id.

t'

Refiu to

Greg Johnson & David G. Savage, Surane Court Calls Fantasy Baseball Safe, Hr Major lzagrc's Argunent to Protect Statistict, L.A. Ttvrs, Jun. 3, 2008,
See

at 41.

- 136 and accompanying text. Regis Behe, Fantasy Sports Leegtes Plt Annchair Quarnrbacks in the l*agte, Prrr. Tntn. Rev. (Greensburg, PA), Dec. 14,2002,aoailableat2002'V/LNR12019633.
tt
infra notes 123
Sae

56

2012 / A Short Treatise on Fantasy Soru and

the

l-au

ll

panded its fantasy sports offerings into football, baskctball, hockcy, NASCAR, soccer, golf, and even fly fishing.'"

III.

THu Flrasv Spon'rs lt>tlsrrv Tolnv

A.

Dffirent Tya of Fantasy Ganes

Fantasy sports today represent approximately u $5

billion per year in-

dustry.te Given the size of the fantasy marketplace, fantasy games are now subcategorized based on three attributes: (l) sport; (2) way ofinitially allocating players; and (3) season length.r'

ronto, Canada), Apr. 24,2009, at 56 (noting that in 2009 FL\W Outcloors Fantasy Fishing offered $10 million in prizes during its Fantasy Fishing for Millions comPeririonX Chris Dempsey, Fantasy Reuolnion Oline Craze is Intoxicating to Arnericans, and Expanding Oatside ilte Sports \Vorhl, Dnxv. Posr, Sept. 9, 2007 , ar 83 ("Fantasy NASCAR is growing, as is fantasy golf. There is fantasy tennis, fantasy soccer (who is Chelsea's top midfielder again?), fantasy lacrosse, fantasy cricket and fantasy bass fishing."); cf Anthony Vecchione, Fantasy Sorts: Has Recent Anti-Ganbling Legislation'Dropped tlte Ball' by Prwiding a Slatntory Carae-Ottt for the Fanlaty Sorts Indnstry, 61 SMU L. Rv. 1689, 169) (2008) ("4 survey of fantasy sports players published in a 2OO3 article showed that 6J/o had football teams, 27o/o had baseball teams, 24Vo had basketball reams, ll%o had hockey rcams,9/o had NASCAR teams, and 3% had golf teams"). t' SeeZach O'Malley Greenburg, Get Real, FoRBES, Mar. 16,2009,at 70 ('Add all these betting sums ro revenues from magazine sales and stat-service subscriptions and you get $468 per player, reports the Fantasy Sports Trade Association' That makes for a $5 billion industry, not including undisclosed amounts from ads."). Cf,, Mike Klis, NFL Preuiea'07 Footbll Nation: Fantasy Football, DrNv. Posr, Sept. 6,2007, at J8 ("Fantasy football grosses more than $l billion a yea, and that doesn't include the private pots accumulated from the 4 million players in the free Yahoo.com league."); Tim Feran, Bc. in the Game: Major Leagrc Baseball Trying to Reattract (sic) Fanta! Players uith Naa Online Fonnn, Co-uvsus DtsPATcH, .A,pr. 3, 2006, aaalable dr 2006 \LNR t5820O2 (A 2006 "survey produced for the [Fantasy Sports Trade AssociationJ indicates that more than $3 billion is spent annually on publications, league fees, commissioner services, transaction fees and the purchase of fantasy-sports-site content."). 6u See infra notes 61 - 100 and accompanying text.

t* ld.; see alo Patrick Hruby, The Cae Agaiut llanlary S1'orff, l(i',\sH. Tltuns, Apr. 29,2003, at Cl; Steve Brearton, Fanlasy Sotts, Real Money: Hotu the ltanlasy Sorlt bagna uent frlt a Cile Office Diaasion to a 83 Billion (U'S') lndnstry, Prouicling Daydream for n to 30 Million North American Sports lattatics, Gl-otl: & Ml- (To-

t2

HawarrlJournal of Sorts (t ntertrtitnteilt L.au

Vol. 3

l.

Different Fantasy Sports

Today's fantasy participants play games in a wiclc rangc <lf different sports.t Fantasy football is currently the most porular, witl-r an estimatc(l 20 million participants per year."' Incleed, at present "[t]he [fantasy] football season generates more revenue than the rest of the s>orts coml>inetl'"r" Fantasy baseball is second in terms of popularity, with al>proximately I I miltion annual participants.6n V/hile most sports fans consider fantasy baseball to be the original fantasy sport, one <f the challenges in bqilding its popularity is the extended length of the Major League Baseball season, ancl the need for fantasy baseball owners to monitor their teams on a m<rc frequent basis than owners in other fantasy games.nt Immediately behind fantasy baseball in popularity lie fantasy racing, basketball, and hockey.6(' According to the Fantasy Sports Ad Network, as of August 2006 there were 4.6 million pafticipants in fantasy racing games (including fantasy NASCAR), 3.2 million participants in fantasy basketball games, and 1.9 million participants in fantasy hockey.nt

infra notes 62 - 7l and accompanying text. Mike Vaccaro, NFL Strife is l*aaing lans Atusb in Denial, N.Y. Posr, May 13,2}ll,at72 (noting that in 2010 nearly 20 million people played fantasy football); ee also Larry Copeland, Anericans Giue Thnnl, lJp to Free Tine - Mostly 'IY, USATooav, Dec.23,2010, at 4.4, (noting that between 20 million and 30 million Americans play fantasy football); Gene \ang, High-Staka Leaye Offers Carraderie - and Agony of Defeat, VIncNIaN PtI-or & Lnocnn Sran (Norfolk, V,{), Nov' 25, 2OlO, ar 7. 63 Gene Sang, Fantasy Football Get Benclted, \7nsH. Posr, May 29 , 2Ol1 , at D3. 6a See This is Not a Fanlasy: Baseball Taka l*gal Ttuist, Players Tn to Lauler ,0 Mediate Leagte Dryates, S. Fr,r. SuN-SNr,el, Apr. 2, 2010, at A1 (noting that there are more than 11 million fantasy baseball participants in the United States);
See

6t
r'2

Richard \ilner, Opening Day

Bloomberg Brings Numbers Gdne to Basebdll Statistics,

N.Y. Posr, Mar.2L,2010, at 38. 6t S Chuck Corder, Snall Tal, PrNsacol Nnvs, Aug. 23, 2005, at Dl, aaailable at 2005 \LRN 27180356 (discussing "daily transactions" as the downfall of fantasy baseball). 66 SeeTbis is Not a Fdnlas!, stru ote 64 ar. Al (referencing "fantasy basketball" "fantasy and NASCAR"); Childs \X/alke r, No More Ctilly Rueption for Fantasy HockE I*agtes, Balr. SuN, Sept. 21, 2006, at E2; ree also, infra, note 67 and accompanying
text),

^t www.fantasysportsadnetwork.com/aboutfantasy.htm (last visited Oct 17, 2011).

6' See Abolt Fantdr! Spor, Fantasy Sports

Ad Network,

http://

2012 / A Sbort Treatise on Fantasy

Sports and tbe I'atu

t3

Finally, one other fantasy game worth noting is fantasy golf.* Fantasy golf is a niche game with a limited number of participants'"" Flowever, because the demographics of golf fans skew toward the higher income brackets, fantasy golf games often inch.rde higlr entry fees and high prize pools."' To meet the needs of golf fans, companies sucl'r as Fantasy Pro T<lr'r Golf have recently begun to offer fantasy golf contests with prizes ur to $3,000
per season.t'

2.

Different !(/ays to Initially Allocate Players

For each type offantasy sport, there are four potential ways to initially allocate players.tt The original way to allocate players in fantasy sports ws through an auction.T] Traditional auctions, the type used by the Rotisserie League, involve a bidding process among participants for players, one player at a time.71 Each player is ultimately assigned to the participant that bids the greatest amount from a fixed sum of money for thar player.tt This continues until every team has "purchased" a full roster of players.t6 A second way to allocate players is through a "modified auction'"i7 In a modified auction, the price of each player is determined before the competition begins, and multiple participants in a single league may select the same player.'' The modified auction is especially popular in short-duration leagues because it does not require all of the league's participants to simulta68
S

Bill

Pennington,
ar,

Fantasy Falfilled,

lncliling Yelling at the TV, N.Y.

TTMES,

6e Id. 70

Jun. 9, 2009,

D6.

Trcnu " Id.

72

roncsrsren ,laaJosh Bousquet, Minor Mes May Hel Signal Bargain Values, & Gtznrrn,Jan. L4,2009,at C4.
S'!alker,

tura note 5 at lD.

7t S sapra note 29 and accompanying text (describing original Rotisserie

League auction).

7{ 7t
76

S S S See

lValker, sura note 5, at lD.

7'

& Eade, snra no 49. tJalker, rrra ote 5, at lD.

Bernhard

infra notes 78 - 79 an accompanying text (describing modified auction

leagues).

7' For fantasy sports games that allocate players in this manner, see, e,g., Rtlet, DRrrSrnplr, http://www.draftstreet.com/rules.aspx (follow "Draft Styles" hyperlink; then follow "salary Cap Leagues" hyperlink) (last visited Nov 7, 2011)
(describing these leagues as "salary cap" leagues); Salary Cap Football, Yasoo! SroRrs, http://football.fantasysports.yahoo.com/salcap (last visited Nov. 7, 20ll).

I4

Haruard.Journal of Sports t Entertainntent l-cttu

/Vol.3

neously select players.Te However, the downside to a modified attction is that it removes the element of "trading" from fantasy sports because trading players would not make sense if a particular player is already on morc than one team's roster, A third way that some fantasy sports leagues allocate players is thror'rgh a league draft.sn Draft leagues take their inspiration from the way in which new players are allocated in the majority of real, professional sports leagues.s' Most fantasy sports leagues that begin their season with a clraft

adopt a "snake format draft," meaning that participants select players in

rotation, often with the same ownet who selected first in round one, selecting last in round two, and vice-versa.*2 The initial draft order is often determined by a random event.tt However, in some of the more comprehensive fantasy sports competitions, owners have the opportunity to express their preference for a particular draft position before the draft begins'*{ Finally, in some rare cases, fantasy participants agree to have players allocated to their teams randomly by software provided by the league's host site."t For example, a growing number of host sites (such as ESPN.com), provide an "Autopick Draft Option," in which a computer program, rather

7') See, e,g,, Rales, snpra note 78. 8t' For an example of a league that initially allocates players via draft, see, e.8,, Fantary Football 2011, CBS Snonts.cov, http://football.cbssports.com/splash/football/spln/single/rules#rules-single-leagues (last visited Nov 7, 2011) (Oct' l8' 201 1) (discussing the "live draft" and "automated draft" options). 8t See Marc Edelman & Brian Doyle, Antitntst and "Free Mtaanent" Rishs of Exanding U.S. Prcsional Sports l*agtes nto Earoe,29 N.\. J. Inr'r L. & Bus' 403, 406-7 (2009, ("The first-year player draft in [American professional sports leagues] is a procedure under which clubs allocate negotiating rights to prospective players in inverse order of the clubs' previous season on-the-field performance. . .[T]he team with the poorest playing-field record during the previous season has the first choice of a player seeking to enter the league for the following season. The team with the next poorest record has the second choice, and so on until the team with the best record has picked. . . . These rounds continue until an appropriate number of players is selected."). 82
S
See,

8)

!alker, srd ote 5, at lD.

e.g,, Fantasy Football 2011,

stra note 80 (stating that "[t]he order ofthe

draft will of, or the day before the draft."). 8t See, e.g., Official Rrle and Regalations of the NFBC, Nr. FrNrasv BsstL CHavrtoNSHre, http://nfbc.stats.com/baseball/375-slow-rules.asp (noting the league's draft formar allows parricipanrs to express a preference for a particular slot in the draft order) (last visited Nov 7, 20lI). "5 S infra note 86 and accompanying text.

be randomly generated between midnight and 6:00 AM ET either the day

2012

/ A Short Treatse

on lantasy Sporn and the

I'au

r5

than a participant, "automatically drafts players to each team in tlrc league on a scheduled draft date."" Despite the efficiency <f the "Aut<lpick l)raft Option," this option remains relatively r.rnropular bccause it removcs all

skill from the drafting of players.

3.

Different Season Lengths

Fantasy sports leagues also differ basecl on the lengths of their fantasy seasons.tt Seasonal leagues (also known as "reclraft leagues") arc the most common fantasy-season length."* In a seasonal league, the fantasy comPetition begins on the first day of a professional sport's regular season, and concludes on the last day."" Thus, none of the fantasy team's rosters or information carries over from one year to the next.e" Rather, at the end of the season, the league ceases to

exist.'' Ifthe

league's participants chereafter

wish to compete against each other for another season' the participants will need to conducr an entirely new player auction or draft before the following
season begins.e'

Somewhat less common than seasonal leagues are perennial leagues (also known as "keeper leagues") that extend beyond a single professional sports season.ej The two main types of perennial leagues are dynasty leagues and rollover leagues.er In a dynasty league, each fantasy participant's entire roster is carried over through the off-season, so fantasy particiPants are able to make player trades with one another during the off-season time period.et Meanwhile, in a rollover league, "each team can 'keep' a set number of

BASEnrLt, (Dec. 26, 2OO2), http://www.sportfanatics.net/,{rticles/General/ Types-Of-Fantasy-Sport Leagues.htm.

8s
8e
See

t6 ESPN Fantry Football 2011: Rtrla, ESPN.cot"t, http://games.espn.go.com/ffll resources/help/content?name :drafts-autopick (last visited Nov. 7, 201 l). 81 See Definitions of the Varioa Fantasy Sports l*agnet, St'oR'rs Ft'Rrtcs FaNrsv

id.

See d.

eu See id,

et

See id. See

Liz Farmer, \Veb Sites )ffering Arbitrationfor Fantasy Spatt Dis(Baltimore, MD), Sept. 10, 2007 (describing leagues where teams Rac. ilter,DArLv keep players beyond a given season as "keeper leagues"). ea See Definitions of the Variou Fantasy Sports l*agtes, vtpra nore 87. e5 See id., sl note 87 . See alo David Kendricks, Pure Fantasy, SN AlroNlo Expnrss-Nrvs, Jan. 6, 2007, at 2C (describing a "dynasty league" as one where a fantasy participant can keep a player on his team for as many years as he wants); ree

'2

id.

e1 See id,;see alo

T6

Haward Joarnal of Sports

&

Entertuinntent Latu

Vol, 3

players at the end of each season to be on their roster for next year," with each participant filling in the remainder cf his roster through a supplemen-

tal auction or draft.e Finally, some fantasy sports seasons last for less than one firll professional sports season.et Of these partial season leagues, the most popular are daily leagues, which involve participants joining, paying entry fees, selecting players, and receivin g prize money, all in a single day.e" According to Brian Schwartz, the founder of the daily fantasy league website f)raftSrreet.com, daily fantasy sports leagues "appeal to aggressive [antasy sports players looking for more instant gratification than traditional fantasy
leagues can offer."ee However, as Ulall StreelJournal fantasy sports reporter

Nando DiFino has noted, daily games have strugglecl to "shake off the stigma of gambling."""'

B.
!ithin

Tlte Staeholdas

each of these types of fantasy sports games, there are six differ-

ent stakeholder groups involved in the action.t"'

l.

Participants

Participants are the individuals who compete in the fantasy sports leagues.'o' In 2010, there were more than twenty-five million fantasy sports
also Cathy Eazio, The Tribe Ha Spoken, Liuen r Yon Leagre, GnNp Rnuos Pnnss,

Jan. 20, 2005, at D2.

'6

S Deinitions of tbe Varioas Fantasy Sorts

See

e7

Left Tach LLC Ssidiary Annonnces

lzagna, strra nore 87. Blne Gains, Exansion,Dx:;x Ptr<

Br.rrrR (Pakistan) Jan. 24,2011, aaailable t 2OIl \LNR 1483977 [hereinafter I*ft Tachle) (referring to these games as the "short-term fantasy sports model" or "short-duration leagues"); Nando DiFino, Eoeryday Fantasies, rVau- SrnnnrJounNAL ONLINE, Mar. 5, 2010, http://online.wsj.com/article/S81000L42405274870
5 103 61223 3 621286.html. e" See, ,g,, FNrasv Snonrs LIve, https://www.fantasysportslive.com/contests.html (last visited Nov. 7, 2011); Dnrr SrRnnt, srtra noe 78. S generally Oskar Garcia, Daily Fantasy Sorts Becone a Ganbling Reality, CoNrm Cosra Tves (Valnut Creek, CA), Sept. 26, 2010, at 9A (discussing growing interest among fantasy sports participants in daily fantasy sports games).

391520457

ee
f

tut ro'

See Left Tackle, sara note 97. oo DiFino, trr note 97.

See
.1ee

infra notes 102 - 169 and accompanying text, Shea, tlprd ote 2o, at ll,

2012

/ A Short

Treatise on Fantasy Sports and tbe

l-au

t7

participants.roj The typical fantasy sporcs participant is a male, in his micldle to late 30s, with a bachelor's degree, and a horsehold incomc <f between $75,000 and $80,000.r()r He lives in the suburbs, s>encls lctween $450 and
$500 per year playing fantasy sports, and competes mainly against friencls hc knows from real life."5 There are also a number of important sub-segments of fantasy srorts participants.'u6 One of these sr.rb-segments inclucles the "high-stakes ;articipants," who play in several fantasy sports leagues per season, play in leagues with entry fees that exceed $1,000 per season, and dedicate l0 <r more hours per week to their fantasy team tosters.r"T High-stakes fantasy participants come from a wide range of different backgrounds. One example of a high-stakes fantasy participant is a small business owner from Oshkosh, \I, who, in a recent interview with his local newspaper, explained that l're spends 15 to 20 hours per week attending to his fantasy sporcs teams and r.r> to 30 hours per week researching players for his fantasy football drafts."'"
FNTsv SpoRrs Tnapn Assoclrox, http://www.fsta.org (last visited Nov. 7, 207L); see also Tom Mulhern, Fantasy Becones Realiry: Three Bnises Based in Madison are Riding a Recesion-Proof Vaae of Web-Based Fantasy r'lr, \ls. S'r. J., June2T,2010,arFL,aaailableat20lO \LNR 13369828 (noting that according to a 2008 report from the Fantasy Sports Trade Association, "[iJt is estimated 25.1 million Americans age 12 and older played fantasy sports in 2008"); Bn't R. Hurrrpsnrns & D.r,rs TaMs^y HovARo, THe BuslNss o, St ottl's: Pnnsprcrrvrs oN rn Sponrs INpusrnv 269 (2008) (estimating the number of people who have tried fantasy sports to be as high as 35 million). ror S Mulhern, rtpra note 103; see also Jeremy Fowler & Chris Silva, Liaing in a Fantasy tV'orld: 'General Managas' Tae Their Sports Leagnes Serioruly, F-,c. ToDav (Melbourne, FL), Jun. 29, 2003, ar I, auailable at 2003 \LNR 18145423; Lee, rilpra note 5, at 69-70 (describing the typical fantasy sports contestant as being educated and having disposable income); cf. Patti Valdmeir, Protecl the Facts for Fdntatl, Fttt.TIvrs, Oct. 23, 2007, aualable at http://us.ft.comlftgarewayl

'uj

superpage.ft?news-id -- fto 10232007 L 30647 9921 &.page : 2 ("[A]ny American whose social group includes 20- or 30-something men with a broadband connection can attest to the popularity of sports fantasies online: at every cocktail party or backyard barbecue, talk soon turns to the fantasy leagues."). '05 S Mulhern, silra note 103; ee also Fowler & Silva, supra nore 104.

'n6

See

to'

infra notes 107

110 and accompanying text.

See

GzrrrE, {ug. 22,2O08,arC4 ("Anothergroup that is being caught up in the fantasy world is composed of high rollers. If any of you upper-crust members happen to come across these words, I direct you to the Fantasy Football Open
cnn' &

generally Josh Bousquet, Hopefuk Span Age and Gender,

rloncnsrRTere-

Championship.").
Fantasy Footballers Catlt In, Posr-Cnpscnr (Appleton, \l), Jan. 16,2009, (referencing fantasy sports participant Dave Gerczak). at A1 to8

18

HaruardJoarnal of

Sports

t Enterlainnenl l-du

VoL 3

Another example is an associate professor of computing and software systems

\ashington.roe In an interview with the Neu, Yor, Tim, he explained that l're "spends about l0 hours a week hanclling tl.e budgets of fantasy teams in high-stakes events," and pays a $1,300 entry fee each year to compete in the National Fantasy Baseball Championship."" A second sub-segment of fantasy sports pafficipants are female partici-

at the University of

pants.'

r'

According to a recent survey by the Fantasy Sports Trade Associa-

tion, female participants are the fastest growing sub-segment of fantasy sports participants."' While once representing just two percent of all fantasy sports participants, females now compose between l5 and 20 percent of the overall fantasy marketplace."' \7hen compared to fantasy sports participants overall, female participants are often described as being more interested in the social component of fantasy leagues."r In addition, many female participants prefer to obtain their fantasy sports advice from websites geared toward women, such as Jordan Zucker's Girls Gaide to Fantasy
Football.t
roe
t5

Vincenr M. Mallozzi,

ln

Fantasy Sports,

It

Hels Being

Rochet Scientist,

N.Y, Ttnans, Apr. 15, 2007, aaailable at 2007 \LNR 7152547 (referencing fantasy
sports participant Clark Olson). .leeJon Boswell, Nore, Fantasy Sort: A Gane of Shill tbat is tou lnpticitly Under State Latu, and nota Exlicitly Legat Under Federal Latu, 21 Cnnuozo Anrs & ENr. L. J.1257 ,1259 (2008) (noting that "[o]ur of rhe 8.5 million people who play fantasy football, million are women"); see alo Jonathan Beer, Media lVorld: 'Vonen Fantary Football Players Grotuing, Drly FlNaNcE, Aug. 13, 2OO9, Ranks of

r"

,ro I.

I*gal

http://www.dailyfi nance.com/story/media/media-world-ranks-of-women-fantasyfootball-players-growing/1!125945 (noting that Yahoo! estimates about 12 percent of its fantasy sports contestants are women).
See Anna Kim, Wonen Share tbe Fantasy ox Football Drafi Day: Local All-Fenale Grcu Reflects Trend of a Neu Ardience Trackixg tbe NFL in Leagtes of tbeir )tun, BurFALo NE\rs, Sept.9, 2009,atDL;Gana PeolePlay, Gnaxp Rrpos PRess, Sept.4,

tt'

2008, at D8. Not Yoa, Bus. rVtne, ll,ug. 27, 2009, http:llwww.businesswire.com/news/home/
20090827005l54lenlCalling-Fantasy-Sports-\idows---Fantasy-Sports

"3 Calling All

Fantasy Sports tYidotus

\Vhen His Fartasy is His Sorts Team nd

(estimating

the percentage of women fantasy participants at l5 percent);Kim,sura note 112 at DI; Ganes Peole PIy, vQ note ll2, at D8 (noting that women currently make up

ofall participants, compared to 3 percent in 2000). C. Kim, ntrd ote ll2, ar Dl (noting rhe number of all-woman leagues has increased steadily, as well as the number of women participating in workplace
15 percent

ttl

leagues).

tD

Sea

fantasy sports participant, who previously appeared

Beer, tilpra note 111 (noting rhat Jordan Zucker is an actress and female

on the television

sitcom

2012 / A Sltort Treatise on Fantasy Sorn and tle l.atu

t9

sub-segment of tl're fantasy sports particirants arc those wh< "family friendly" or educational leagues."(' Partici>ants in famcompete in ily friendly leagues seek to participate within "an onlire environmcnt whcrc grownups and kids can enjoy fun and interactive features that arc educational."rrT In stark contrast to the high-stakes participants, family gamcrs are generally unconcerned with league entry fees ancl rrizc money. "* Rather, they care primarily about the interactive ex:eriences their games

A final

provide."e

2.

Host Sites

For each type of fantasy league, one of the first league decisions involves choosing a "host site." "Host sites" are the welrsites that st<re league data and serve as the place where participants make changes to their rosters.t'n These sites provide a platform for real-time sratistical updates and tracking.'2' In addition, some host sites collect league entry fees, distribute prize money, manage message boards, and provide expert analysis.'" In terms of market share, there are currently three dominant host sites in roday's fantasy sports marketplace: ESPN, Yahoo!, and CBS Sports.'tr Both the ESPN and Yahoo! sites offer only one type of hosting: a basic, free
service available to

all users.'2'r By contrast, CBS Sports offers three types of

"Scrubs"); ee also Gtxrs Gulor ro F^NT^sy Foor:tl,tLL, http://girlsguidetofantasy football,com (last visited Oct. 17, 2011). t'6 See infra notes 1 I7 - lI9 and accompanying text. ttt FAMILv FNrasv Sponrs \rusIrt, http:llfamilyfantasysports.com/about-us (last visited Oct. 17, 2011). tt8
t

See See

id. id.

te

Humphrey v. Viacom, Inc., No. 06-2768,2007 tL 1797648, *l (D.NJ. June 20, 2007) (noting that host sites obviate the need of early fantasy sports participants to compile lineups and update player statistics manually).
'20 Sea

t2'

See See

id. id.

'2'

"i Cf, l/ang, ytpra note 3, at D3 ("Yahoo is the most visited fantasy football site, according to recent data compiled by Experian Hitwise, a leading Internet analytics service provider. Yahoo, which offers free team scoring but charges for its enhanced game tracker function, claimed nearly 46 percent of all fantasy football visits in September 2010, with ESPN next at 34 percent.").
games.espn.go.com/flb/content?page:flbrulesindex20l I (last visited Oct. 17, 201 1). Note, however, that both ESPN and Yahoo charge users for the purchase of premium add-on services. For example, Yahoo sells four premium-add on-services:

"'t Set E.PN Fantasy Baeball 2011: Rttles, ESPN.cor,t, http://

20

HarvardJoarnal of Sport t Entertrtitnrcnt l-ctut / Vol. 3

hosting: Free, Commissioner, and Premium.'" The CBS C<lmmissioner service costs participants 6I79.9t per league (917.99 per team in a lO-team league), and gives participants the ability to view live game scoring, as well as "complete control of . . . rules, scoring, and overall setur."'"' Meanwhile, the CBS Premium service costs anywhere from 829.99 rc 849c).99 per team and includes a cash prize for the league winner that ranges from 5O%o to 70/o of the league's total entry fees.''7 Thus, fantasy sports participants that select CBS's Premium hosting service do not need to privately collect entry fees or pay prize money.''" In addition to these three dominant host sites, most professional sports leagues offer free hosting services through their own centralized league,''" and a number of niche businesses operate host sites for specialized participant groups.'rt' For example, high-stakes participants today have a variety of web-hosted competitions from which to choose.''' One such competition is the \orld Championship of Fantasy Football ("\COFF"), which offers an annual, approximately 600-participant, fantasy football tournament with t' Another competition, the a $1,800 entry fee and a $300,000 grand prize.t Fantasy Football Players Championship ("FFPC"), offers a somewhat smaller
a league counting report; a trade review service; a fantasy sports guide; and teammnagement and recommendation software. See Yahoo Fantat! Bavball Preniun

Add-On, YRHoo! SeoRrs,

premiumaddons.

http://baseball.fantasysports.yahoo.com/bI/

See Fantasy Baeball 2011, CBS Seonts, http://baseball.cbssports.com/splash/ baseball/spln/single/chart (last visited Oct. 17, 201 l).

t2t

tt6 Fantasy Baeball

2011

Conmissioner,

CBS Seonrs,

http://base-

ball.cbssports.com/splash/baseball/spln/mgmt (Oct. 17, 201 l). t21 See Fantasy Baseball Pranitm Ganet 201 1 , CBS Sponrs, http://baseball.cbssports.com/splash/baseball/spln/single (last visited Oct. 17, 2011). t28 See Fantaty Baeball Prenian Games 2011, sapra note 127.

"e See, .t., Major Leagae Baeball's Fantasy Barcball, MLB.cou, http:// mlb.mlb.com Imlblfantasy|?tcid:nav-mlb-fantasy (last visited Oct. I7, 20I I); Ntional Football Lcagadt Fantaty Football, NFL.cov, http://www,nfl.com/fantasy (last
visited Oct. 17, 201L).

ttt

')n

See
See

infrd notes 132 - 136 and accompanying text. infra notes 132 - 134 and accompanying text.
Posr-Cnns-

ri2,leeWang,tupranote62arT;seealsoFantasyFootballersCa:hln,

crNr (Appleton, $I),Jan. 16,2009,at A1 (noting that che r(/orld Championship of

Fantasy Football most recently consisted of 600 total teams); Mark St. Amanr,Wlten Fantasy Players Go All /2, N.Y. Trvrs, Aug. 2, 2O07 , ar l6 ("The \X/COFF is this country's original high-stakes fantasy football league, the Super Bowl of the hobby. The entrance fee alone is almost $2,000 . . , including a whopping $300,000 champion's purse.").

2012

/ A Short

Treatise on Fantasy Sports and be

ktu

2t

fantasy football tournament, where all league entry fees are rlaced into an escrow account.ri Meanwhile, the National Fantasy Baseball Championship ('NFBC") offers a high-stakes fantasy baseball contest, which inch"rdes over 300 teams, a $1,300 per participant entry fee, and a grand prize of more

than $100,000.'31 Finally, for the family-oriented segment of fantasy sports l)artici:ants, Family Fantasy Sports provides hosring services for games that are free to

enter.'"

\yr'hile many of the Family Fantasy Sports games have prizes for the winners, these prizes "are focused on kids ancl families," and are intended t<l encourage healthy lifestyle behaviors such as fitness and saving money for college.'l('

3.

Commissioners

In addition to selecting an appropriate hosting service, every fantasy sports league also needs to select a commissioner."t "Commissioners" are those who manage fantasy sports leagues by establishing league rules and resolving disputes over rule interpretations.''" In many high-stakes commercial leagues (e.g., the \COFF, FFPC and NFBC), the competition pro-

Sr. LouIs Posr-DrsparcH, Mar. 12, 2O07, at C2. ']t S FaMILv FaNsv Sponts, http://familyfantasysports.com/fantasy-leagues/ prize-rules/ (last visited Oct. 17,2011).
Se

ttt l{

See

Fantasy Footballa Cash In, rttpra note 108, at

Al.

Mike Rainey, Vanl to Mae a Bet. . .

On Fantasy Baseball?,

tt6 Id.

tt'

See

infra notes 138

talke

143 and accompanying text.

S r, rilpra note 5, at lD; see also Bernhard & Eade, tilpra note 4), at 30 ("The commissioner manages the league by establishing league rules and resolving disputes over rule interpretations. Commissioners may also be responsible for publishing league standings (or selecting the Internet service that will do so), ensuring that all fees are paid, and organizing drafts, league parties, and/or award ceremonies."); Hancock, silra note 20, at 325 ("Using online websites to host the league, the 'commissioner' of the league gathers each gamer's entry fee to create a cash prize.").

rJ8

22

HaraardJoarnal of Sports & Entertainnent

lzut /

Vol. .)

vides a league commissioner.rre In most >rivatc fantasy leagues, onc of thc league's participants is nominated to serve in that role.'r" In recent years, there has been movement in both commercial ancl private fantasy leagues to outsource some of the commissioner's responsibilities to a third-party dispute resolution business, such as SportsJuclgc.com.'r' While the decisions of these thircl-party clispute resolution businesses arc not inherently legally binding, a fantasy league could write int< its league constitution an arbitration clause that woulcl give these rulings a binding effect.ra2 For example, the SportsJuclge.com Model League Constitution rec-

ommends that fantasy sports participants adopt language in their league rules that states "[aJny and all disputes amongst league members about any of the rules and terms related to either this league or tle league constitution shall be resolved, in a final and binding manner, by SportsJudge.com."'ar

4.

Treasurers

Fantasy sports leagues with entry fees and prize money also must select a treasurer to collect money at the beginning of the season, and to distribute it to the winners ar che season's end.'{a In high-stakes commercial leagues, an employee of the host site serves in this role.''rt In private leagues, chis job

Bu- CuauptoNsHIp, hrtp://nfbc.srars.com/baseball/nfbcdoubleplay-rules.pdf (discussing throughout the role of the NFBC's internal commissioner) (last visited Oct. L7,20Ll); cf.Talalay, supranote 64,atlA. ("ForrLauderdale-basedCBSSports.com gets daily inquiries but encourages players to resolve their own clisputes unless they are playing premium games in which the company, rather than a league member, serves as commissioner."). tao See Fantasy Spons: A Booming Bnsiner, silrd note :3 ("ln addition to ou/ners, each league carries a commissioner, someone responsible for managing the league."). 'lt S SponrsJuDcE, http://www.sportsjudge.com (last visited Oct. 17, 2011) (discussing SportsJudge's role in providing ourside dispute resolution to fantasy sports leagues); \Taldmeir, tilpra note 104 ("Bur, as always, where two or three people gather together online there will be disputes and, as fantasy sports continue to grow, there are likely to be more and more of them. Mr. Edelman has set up a website, www.SportsJudge.com, to arbitrate these virtual disputes online. All this legal activity is a sure sign that fantasy sports have finally come ofage. Even alernative realities need some rules to live by.").
ta2 See infr note 143 and accompanying text.

"'

See, e.g.,

National Fantasy Baeball Chanpiontbip Rzler,

Nnt. FnNlasv

Bnsa-

r{J
taa

See See

Sample SportsJudge.com League Constirution (documenr on file). infra nores 145 - 154 and accompanying text.
e.g., National Fantasy Baseball Chantionsltip Rules, snra

'15

See,

note 139 at 11.

2012

/ A Sbort

Tretise on Fanrasy Sports and the

l-au

23

is often performed by one of the participants.''r Like with commissioner

services, however, a growing number of private leagues are outsourcing the treasury role to third parties.''r7

The most well-known of these third-party treasury sites is LeagueSafe, which was launched in March 2008.'4* LeagueSafe allows fantasy sports participants to transfer funds directly from their bank accounts to the \/ebsite.'ae Once LeagueSafe receives league funds, it deposits them into an interest-generating, FDlC-insured bank account with either U.S. Bank or The Bancorp Bank.ttu At the end of the season, LeagueSafe disperses these funds "in accordance with leach fantasy) league's rules."'tr In exchange for its services, LeagueSafe charges users who wish to transfer money (by paper check or through an "electronic funds transfer") a 83 fee.ts)
.A,nother company that provides third-party treasury services to fantasy sports leagues is Fantasy Sports Vault ("FSV"), which declares on its website that its mission is "to provide a secure, efficient, flexible, easy to use and neutral 3rd party proprietary virtual treasurer system to manage your fantasy league's money."rt3 According to the FSV website, like LeagueSafe, "FSV

. . . money into one of two holding accounts, both located at FDIC insured banks."'ta However, the FSV website does not prominently disclose which banks hold the participant funds.
secures

ta6

See

Hou to Elinindte Tboe

Roto

Dan Trdes, CrNcrxNarl Posr, Aug. 11,

L998, at 5D (suggesting that every fantasy league should select one of its participants to serve as its treasurer).

infra nores 148 - L54 and accompanying text. .9e Steve Bil\s, Offering Real Sttrity to Fdnrary Lzag, A,u. BaNrnR, Oct. 5, 2O08, at 5, aoailable at 2008 \LNR 18602682.

'a'

See

l{8

t4<)

See

Hou It'V/'orhs, Leacunsane.cou, https://www.leaguesafe.com/

Howltr(/orks (last visited Nov. 9, 2011).

Fantasy Sports, CtnrINE, Oct. l, 2008, at 3, aaailable at 2008'LNR 18808298. "u lvlty Fantasy Sportt Vault, FaNrasvSponrsVAULT.coM, http:// www.fantasysportsvault.com/Viedwhyfsv.aspx (last visited Nov, 9, 20LI). "o ,^Qt, Faxr,rsvSpoRrsVautt.cotr,t, http://www,fanrasysportsvault.com/View/ Faqs.aspx (last visited Nov.7, 2011)

"u Id.; s also BllIs, stpra nore 148. "t See Hoa It rVor, sura note L4). "2 S Payncent Prouider Offers Prepaid Crds fa

24

Haruard Journal of Sports t Enertainntent l.atu

VoL 3

5.

Strategic Aclvisors

Then there are the strategic advisors, who make their living lry provicling advice to other fantasy sports partici>ants.'tt Much like stock analysts on \Wall Street, fantasy sports advisors devote their careers to following the performances of professional athletes in far greater detail than thc average working professional could do independently.'t6 The range of services provided by fantasy sports advisors varies significantly.rsT Some advisory websites provide generalized information abor.t premier players. For example, the advisory sites of Sandlot Shrink and lloto Experts provide information about specific players they believe are likely to perform well.'tn Other sites, such as Rotowire.com, provide news wire updates on a broader range of players, many of whom still compete on a minor league level.'te Still other websites provide a call-in line, to which fantasy sports participants may call and pay by the minute to speak with a selfproclaimed fantasy sports "expert."rr'o Finally, the newest form of fantasy sporcs advice occurs thrclugh "analytical tools" that assist participants in drafting players and optimizing their weekly lineups.'"' One such provider of fantasy advice via "analytical tools" is Bloomberg Sports: a division of the financial services company Bloomberg L.P.r2 In 2010, Bloomberg Sports launched its analytical tools business to help fantasy participants optimally draft their teams at the beginning of the season, and then analyze trade offers and potential roster moves during the

season.'i Today, the Bloomberg Sports advisory software "syncs with

CBSSports.com, ESPN and Yahoo!

to read the settings and teams in

those

'55 See infra notes 158

164 and accompanying text. 164 an accompanying text. 164 and accompanying text. "' tss See Sttbscription Info, Tr SNpI-or SHRINK, http://www.sandlotshrink.com

't6

infra notes 158 See infra notes 158

See

(last visited Nov.7,

20Il);

ee

alo RoroBxntnrs, http://www.rotoexperts.com/

sjowbranch.php?id:94 (last visited Nov.7, 201 1). 'te .ia Rorovtnr, hrrp://www.rorowire.com (last visited Nov. 9, 2011). '("' .1 Apvrson FNrnsvSpoRTS GuRU, hrrps://www.keen.com/derails/AdvisorFantasySports-Guru/Fantasy-Sports/5 300988 (last visited Nov. 9, 201 L). t6t Front Office 2011, Broovsrnc Seonrs, http://bloombergsports.com/frontoffice/about (last visited Nov. 9, 2011).

t6' Freqrcnt

sports.com/faq (last visited Nov. 9, 2011). ,6t Id.

Aszd Quations,

BLoovarRc SpoRTS, https://www.bloomberg

2012

/ A Sbort Treatie

on Fantasy Sporr and tbe Lau

25

leagues and customize rankings, recommendations and analysis

to the sct-

tings of che league."'n'

6.

Insurers

Finally, there is even an emerging insurance market to protcct highstakes fantasy sports participants from monetary loss in the event of an injury to a player on one's fantasy sports team.'6t The first insurance company to get into the business of fantasy sports was Fantasy Srorts Insurance ("FSI"), which is based out of Long Island, NY.'6 Like all traditional insurance policies, FSI insurance policies are unclerwritten by an A-rated car-

rier, Lloyd's of London.'t Currently, FSI policies insure fantasy participants for up to $1,900 in
losses ofleague entry fees, league transaction fees, and fantasy magazine sub-

scriptions, if the purchaser of the policy has a player on his fantasy team that misses more than a certain number of games in a season due to injury.'68 In
at least one instance, FSI has partnered with a high-stakes fantasy sports host site, the National Fantasy Baseball Championship, to provicle contest participants with the ability to immediately insure one of their players drafted

in that

contest.tr'e

IV.

LEcer Rrsrs Fon F,lrlsv Sponrs Hosr Srrns

,{lthough some fantasy sports stakeholders would like their games to be free from government regulation, the fantasy sports industry today is indeed subject to a wide range of federal and state laws.''" Most directly, ,6' Id.
Se Nando Di Fino, A Nat Kind of Protection,l(/n-l Sr. J., Sept. 1,2009, http://online.wsj,com/article/ SB 1 000 14 240 1297 02035 5 060457 4360691 0 I 97 5 7 7 3 8. html. '66 See id.; see alrc Alex Prewitt, Thi NFL ltrrance Poliry is No Fantasy,IJSA ToDry, l':ug. 26, 200p, http://www.usatoday.com/sports/football/fantasy 12009-08-

tr'5

24-insurance-N.htm?csp : 34. t61 SeeDi Fino, sapra note 165;

ee

t('" See Fantasy Baseball,

also Prewitt, utra note 166.

FrNrasv SpoRrs lNsunarucn.cou, http://

(last visited Nov. 9, 2011) www.fantasysportsinsurance.com/fantasy-baseball.aspx (noting that Fantasy Sports Insurance offers insurance policies to protect against injury to a single player, two players, or three players). t6e See Fantasy Spor lnsarance, Nr. FNrasv Basrsart CgvptoNsnlt, http:// nfbc.stats.com/baseball/insurance.asp (last visited Nov. 9, 201 1). t'o See infra notes 172 - 305 and accompanying text.

26

HaruardJoarnal of

Sports

t Enterttinaent Lau,

Vol.

.J

fantasy sports host sites must follow federal ancl state laws relatccl to gan'ring

activities and intellectual property rights.'''

A,

State Ganliling

l-au

State gambling law is perhaps the most relevant area of law pertaining to fantasy sports host sites.'" Accorcling to che Meniam-tVebster )nline Dictionary, "to gamble" is defined as "to play a game for money or property"' or "to bet on an uncertain outcome."'tt However, in most states, not every

"game for money" or "bet on an uncertain outcome" is defined as illegal gambling.'ta Rather, most states maintain explicit carve-outs that permit certain activities, such as stock trading, that otherwise would seemingly fall under the category of gambling.'tt

1.

Is Fantasy Sports Illegal Gambling under State Law?

In most states, a plaintiff can make a prima facie claim of illegal gambling by showing that an activity involves three elements: "consideration,"
infra notes 172 - 305 and accompanying text. S Anthony N. Cabot & Louis V. Csoka, Fanlasy Sports: )ne Fonn of Maitstrean V{/'againg in the United States,40 J. Mansuarl L. Rv. 1195, 1202 (2007) ("[The) natural approach to accessing the legality of fantasy sports is to begin with an analysis of state laws for two reasons. First, most federal gambling laws were enacted to help states enforce their own gambling laws. Second, given the complementary [sic] or supplemental nature of federal gambling laws to state gambling laws, those rha firsr look to rhe federal laws can sometimes miss the larger theoretical framework underlying these federal laws."). t" Gnble Definition, MrnRlav-llnBSTER.coM, http://www.merriam-webster.com/dictionary/gamble (last visited Nov. 9, 2011). t1a See, e.g,, MoNr. Cop ANN. 923-t-802 (2010) (permitting under gambling law certain fantasy sports games); see ako S.E.C. v. J.\W. Howrey Co., )28U.5.293, 298-99 (1946) (noting that Congress, under the Securities Act of 1933, has insulated from state gambling liability "investment contracts," which the Supreme Court has defined as contracts pertaining to ransactions "whereby a Person [(i)] invests his money [(ii)) in a common enterprise and [(iii)] is led to expect profits [(iv)] solely from the efforts of the promoter or a third party . . . .").

"t tr
f

See

ltt

Christine Hurr, Reylating Public Morals and Priuate Marels: Online Secari-

Trading, Internet Ganbling, and the Spemlation Paradox, 36 B.U.L. Rnv.371,173 (2006) ("To characterize investing as gambling has become a trite and toothless analogy. However, most worn-out proverbs remain in the conventional wisdom because a kernel of truth continues to resonate wih those who need them. In fact, the stereotype of an investor as a gambler seems particularly well deserved.").
ties

2012

/ A Sltort Treatise on Fanlasy

Sorts and tlte

lttu

27

"reward," and "chance."'t Each of these elcments has its <wn clistinct definition.'tt The element of "consideration" is clescribccl as a "qnid ro ra0," or something in exchange for something else.''* Most cotrts have constrted the term "consideration" narrowly in the context of gambling, limiting its definition to instances in which a participant provided moncy or a valuable item of property in exchange for the chance of greater winnings.'/e However, a minority of courts have adopted the true contract-law meaning of the word "consideration," and found that "consicleration" involves any legal detriment, even non-monetary in value, in exchange for the chance to win a
prize.t*t'

I'r' S Geis v. Cont'l Oil Co., 5ll P.2d 725,727 (1973) (noting, for example, that under Utah law "the statutory elements of a lottery are: (1) prize; (2) chance; and (3) any valuable consideration."); see also McKee v. Foster, 347 P.2d 585, 590 (1959) (noting same under Oregon law); Valentin v. El Diario Prensa, 427 N.Y.S.2d 185, 186 (N.Y.C. Civ. Ct. 1980) (notinS that in New York State, three elements are needed to constitute an illegal lottery: (1) consideration, (2) chance, and (3) a prize); People v. Hunt, 162 Misc. 2d 70, 71 (N.Y.C. Crim. Ct. 1994)
("Gambling occurs when a person stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a cercain outcome.") (internal citations and quotations omitted).

t"

See

infra notes 178

188 and accompanying text.

'tt Conn.o{CoNTRncrs$lLO;seeaIsoREST^TEMENT(Ssco.u)orCoN'rRAcrs 71 (1981) ("To constitute consideration, a performance or a return promise must be bargained for. . .The promise may consist of (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification, or destruction of a legal relation."); Tnovas D. CnNprL & DoucI-^s J. \H^LEY, Courntcts: Pnoslrvs aNp MnrRar-s 137 -18 (5rh ed. 2008).
t7') Casns,
See, e.g,, Alberrson's, Inc. v. Hansen,600 P.2d 982,986 (Urah 1979); Cudd v. Aschenbrenner,3TT P.2d 150, 155-56 (Or. 1962) (finding that participant's expending of time, effort or inconvenience do not amount to consideration for purposes of Oregon's anti-gambling statute); Glick v. MTV Networks, 796 F. Supp. 743,747 (S.D.N.Y. 1992) (noting the New Jersey Attorney General's position that under the current New Jersey gambling statute, "legislative intent was to exclude from the statutory elements composing the gambling offense the sort of personal inconvenience which will constitute consideration sufficient to suPPort a

contract.").

'to .1 State ex rel. Schillberg v. Safeway Stores, Inc,, 450 P.2d 949,953-54 (\ash. 1969) (en banc) (applying simple contract theory as a basis to find consideration in the gaming context); ee also Afiliated Enters., Inc. v. \alker,5 A.2d 257, 259-60 (Del. Super. Ct. 193 (using Professor \illiston's classic definition of con-

28

Haruard Joarnal of Sports t Entertaianent l-atu

Vol. 3

Similarly, the element of "reward" is the prize rhat one gcts for winning a bet. Courts have held that a reward must be tangible in form.r^l
However, something tangible, even of small value, is sufficient to constitrte a reward.t"2 Finally, the element of "chance" is defined as "something that happens unpredictably without discernible intention or observable canse."'"t In other words, courts have found that the element of chance reqnires that a game's result be driven not by "judgment, practice, skill or adroitness," zl rather by factors entirely outside of the participant's control.'"r To determine whether a particular activity satisfies the gambling element of chance, courts will traditionally apply one of three tests: the "predominant purpose test," the "any chance test," or the "gambling instinct test."rtrt The "pre-

dominant purpose test," which is applied by most states, deems an activity to be one of chance where "greater than 50 percent" of the result is derived

sideration in the contract law context to determine whether consideration \vas present in a gambling context).
See, e,g., Srare v. 26 Gaming Machs., 356 Ark. 4l ,51 (ZOO4) (noting that an intangible reward, such as viewing a nude woman on a video strip poker game, does not quali$r as a reward for purposes of gambling law). t82 See, e,g,, South Carolina Law Enforcement Div. v. 1 Speedmaster S/N 00218, 2001 \L 2139081, at *4 (May 25,2011). t83 Cbance Definition, Mrnnlar',r-\rBSTER.coM, http://www.merriam-webster.com/dictionary/chance (last visited Nov. 7,201 l). 't{ Srate v. Gupton, 30 N.C. 271,273-741tS48X see aloYalenrin v. El Diario Prensa, 427 N.Y.S.2d 185, 187 (N.Y. Civ. Cr. 1980) (noting that a game is besr defined as one ofchance if"[tJhe winners are not chosen on their personal qualities, but rather on whether or not their loved ones can get together enough money to beat the competition in buying sufficient seventeen()-cent coupons."); People v. Hunt, 616 N.Y.S.2d 168, 170 (N.Y. Crim. Ct. 1994) (finding that a "contest of chance is defined as any conest, game, gambling scheme or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein.") (internal citations omitted); Utah State Fair .A,ss'n v. Green, 249 P. 1016, 1020 (Utah 1926) (noting that a Utah state statute describes a game of chance as "a game determined entirely or in part by lot or mere luck, and in which judgment, practice, skill, or adroitness have honestly no office ar all, arc thwarted by chance; a game in which hazard

t8t

entirely predominates"). 'tt ,{nthony N. Cabot et al., Alex Rodrigtez, A

Monhey, nd ilte Gane of Sabble: Tbe Hazard of Using lllogic to Define Legality of Ganes of Mixal Sill and Chance,57 Dnrr L. Rv. 383, 390-94 (2009) (noting a fourth test, the "material element test," which seems to conflate with the predominant purpose test).

2012 / A Short Treatise on Fantasy

Sports and tbe lanu

29

from chance.''o By contrast, the "any chance test" finds that an activity is based on chance if "a particular game contains any chance that infh.rences the outcome of the game,"r87 and the "gambling instinct test , . looks to the nature of an activity to determine if it appeals to one's gambling
instinct.
" r88

2.

Is Fantasy Sports Illegal Gambling? (Majority View)

and

A majority of states adopt a liberalizecl definition of "consicleration" the "predominant purpose test" as the measure of chance. In these

liability under state gambling law varies based on the rules and structure of that particular fantasy sports game.r*e On one end of the spectrum, host sites that offer free league entry are unlikely to violate state gambling laws because those games fail to meet the element of "consideration."teo Similarly, fantasy sports games that do not provide prizes to winners are not likely to violate state gambling laws because they fail to meet the element of "reward."'tt Meanwhile, seasonal and perennial fantasy sports leagues that initially allocate players via a cradirional auction are probably legal because the results of these games are driven primarily based on skill, rather than chance.'e2 By contrast, other forms of pay-to-play fantasy sports games present greater legal risk.rer For example, "modified auction," "draft," and "autopick" leagues are more likely to be categorized as games of chance because fantasy participants in these leagues are denied the strategic opportunity to bid up the price of certain players based on their presumptions
states, a host site's risk of

t"6 Id. at 392 (citing Dep't of Corr. v. Worker's Comp. Appeals Bd., 90 Cal. Rptr. 2d716, 72O (Cal. Cr. App. 1999) (defining the term "predominanr" as "greater than 50 percent"). t87 ld. ar 393. t88 ld, at 3g3-94. '8t .S Cabot & Csoka, ura note 172, at 1207 (arguing that whether a fantasy sports game is illegal under state gambling law "varies based on the method of play of the fantasy game at issue"). Leo See, e,g., HtnnphrE,'WL 1797648 at *10 (noting that a minimal entry fee paid by a fantasy sports participant to a host site to compete in a fantasy sports game was not consideration for gambling purposes but rather consideration merely for the day-to-day statistical services provided by the website).

tet

- 180 and accompanying - 182 and accompanying tei See supra notes 183 - 188 and accompanying
See See

sapra notes 178

text. text. text.

t')2

supra notes 181

)o

HaruardJoarnal of Sports & Entatainnent Laut

Vol. 3

about competitor preference.re'r In addition, the "draft" methocl <lf initially allocating players includes an additional element of chance with respect to a participant's selection order in the fantasy league's draft.ret Mcanwhile, the "autopick" method is based exclusively on chance, as parcicipants arc not making any independent decisions about player allocarion."'6 Along these same lines, pay-for-play fantasy sports leagues that extend for less than a full professional sports season involve substantially grcater levels of chance than full season leagues, and rhus also presenr heightenecl risks under state gambling law.'e' This is because shorr-season fanrasy sports games do not extend over a period of rime sufficient in lengtlr f<lr a fantasy sports participant's strategic and negotiating skills ro offset "chance

factors such as the physical and mental conditions of players, porential problems between team members, and the game-time wearher condirions."res In addition, team-owners in one-day fanrasy sports leagues lack the opportunity to participate in strategic gamesmanship, such as negotiating trades with other owners, or engaging in other "team management" activities, such as adding or dropping players.'et

3.

Stricter Views Toward Fantasy Sports

Fantasy sports games, meanwhile, face a far greater risk of liability in a minoriry of states that adopt one of four alternative positions.""' First, in
")a See Cabot & Csoka, !Qra note I72, ar 1209 (noting rhar in aucrion-based fantasy sports games, "the fantasy orvner must use srraregy in assessing rhe other team owners, For example, do you risk bidding on players that you do not wanr simply to drive up their price and to reduce the amount of money that other teams have to bid on players that you want? Further, the team owner musr prepare to make adjustments in the course of the draft ro accommodare rhe players chosen and the price paid."),

te'

S sttpra
See

notes 181

te('

sapra notes 181

Sae Joker Club, L.L.C. v. Hardin, 643 5.8.2 626, 629 (N.C. Ct. App. 2007) (noting that the length of a game is also an important issue in poker, as in the short term the game is primarily one of chance, whereas in the long rerm skill seems ro predominate); d Geoffrcy T. Hancock, Note, Upstaging U.S, Ganing Iw: Tbe Potn-

re'

182 and accompanying text. 182 and accompanying rext.

tial

Fantasy Sports Qtgnire and tbe Reality of U,S, Ganbling Lau, 31 T. Jrrnrnson L, Rev. 317 ,349 Q008) (noting that in regular, full-season fanrasy sporrs conrexrs, rhe

"prolonged period" of che competition may lead to the conclusion rhar less luck is
involved).

'es Boswell, tilra note

tee
2oo
See

lll, at 1265.
at l2l}.

Cabot

&

Csoka, slra note 172,

See

infra notes 201

231 and accompanying texc.

2012 / A Sbort

Treatise on Fantasy Sorts

ard

the l-atu

1l

states such as Delaware,:t" Kansas,2t'2 Michigan,"'J Ohio,'t''t rVisconsin,"'' t(/ashington,"'r' ancl Vermont,"" fantasy sports encounter a grcater risk <lf
because courts in these states have adopted the true contract-law meaning of the word "consideration." Thus, in these states, tle gamblinglaw element of "consideration" is met, even absent an entry fec, so long as the contest participant expends substantial time or effort that benefits the contest's host in some way.2t'" Stated in terms of fantasy sports, even if a host site offers a free fantasy sports game, the game may mn afoul of state

liability

the elements of "chance" and "reward" are both met.'()e Second, fantasy sports host sites face greater risk of liability in states such as A,rkansas,ro lowa,zrr and Tennessee,t'' which interpret the element of "chance" as outlawing games that require any chance ("The Any Chance Test").2'r In these states, all fantasy sports games would violte the state's pertinent gambling laws because even the most intricate fantasy sports game gambling law
e.g,, Affiliated Entas,,5 A.2d ar 261 (Del. Super. 1939) (finding that a registration and appearing at a particular lobby, at a particular time, is sufficient to constitute consideration ro enter a free contest).

if

filling out
2n2

'nt

See,

KAs. Srar. A{N Zl-6403(c) (Vest 2011). Sproat-Temple Theater Co. v. Colonial Theatrical Enters., 267 N.\ 602, 603 (Mich. 1936) (finding that there is consideration even in a free entry contest when it induces someone o attend an event that they would not otherwise attend). 20
Sea

'or Jae Kroger Co. v. Cook, 244N.8.2d790,797 (Ohio Ct. App. 1968) (finding that the element of "consideration" may be met even when entering a free contest merely based on the advertising benefits derived by the contest's host). 2nt State ex. rel. Regez. v. Blumer, 294 N.t(/. 491,492 (\is. 1940) (defining "consideration" as "the disadvantage to the one party or the advantage to the other" and determining the travel to a store to fill out a free entry for a prize met this definition). 'u6 .estate ex. rel. Schillberg,4l0 P.2d ar 953-56 (\ash. 1969). ''u' See, .g., Srare v. lVilson, 196 A. 757, 758-59 ffr. 1938) (noting that in Vermont the element of considerarion is mec as long as some participants p y an entry fee, even if all parcicipants do not need to pay entry fees). 2os See flpra notes 201 - 207 and accompanying text. 2oe See supra notes 201 - 207 and accompanying texr. 2'o ,i State v. Torres, 831 S.\7.2d 903,905 (Ark. 1992).
T Parker-Gordon Imporring Co. v. Benakis,238 N.\. 6ll, 613 (Iowa 1931) (noting that Iowa gambling law finds it irrelevant whether a particular game is predominantly based chance or skill). "t Se TENN. Cope ANN. $ 39-17-501 (2010) (defining "gambling," subject to a number of exceptions, as "risking anyrhing of value for a profit whose return is to any degree contingent on chance").

2rl

'tt

See

infra note 214 and accompanying text.

32

HarvardJoarnal of

Sports

t Entutrtinnent l-aut

Vol, 3

involves at least some level of chance with resrect to wcather conclitions ancl player injuries.2''r Third, fantasy host sites face greater risk of gambling liability in the states of Florida and Louisiana because, in these states, their atcorneys general have already issued advisory opinions cautioning against certain fantasy games.''t In Florida, former Attorney General Robert A. Butterworth published an advisory opinion inJanuary t99l tlrat concluded it was illegal to "participat[e] in a ldraft-basedJ fantasy sports league whereby contcstants pay a fee for the opportunity to select actual professional sports 1>layers."''r' Meanwhile, in Louisiana, former Assistant Attorney General Thomas A. r(/arner III issued an advisory opinion in April 1991 stating that a commercial fantasy sports game with prizes, which was entered into by the participants dialing a 1-900 telephone number that charged a fee of $2.00 per minute, violated Louisiana's state gambling law.''' Finally, fantasy sports host sites face a greater risk of liability in Arizona and Kansas because these states call into clor.rbt the legality of certain fantasy sports games on their state websites.''* Specifically, Arizona's Department of Gaming Guide to OfReservation Gambling states that "fantasy sports team games are illegal if the host of the event receives a fee for services provided or if all the pooled money doesn't go back to the participants."2re In other words, "[iJf the host takes a percentage of the pooled money, the Fantasy Sports Team contest is illegal."2t" Meanwhile, Kansas's Racing and Gaming Commission website states that "as with any other illegal gambling rnatters, if a fantasy sports leagr.re involves the elements of (1) prize, (2) chance, and (3) consideration, then

it

is an illegal 'lottery' prohib-

Cabot er, al., tnra note 185, at 393. Op. Att'y Gen. 91-3 Q99D, aaailable at 1991 Att'y Gen. 9I-14 (199D, aaailable at l99l \L 575105, 2t6 See Ela. Op. A.tt'y Gen., sura note 2li.
See

2t1
2r5

SeeFla.

WL 528146;

La. Op.

2t'

See

Ela. Op.

Art'y. Gen., rur nor.e 2lJ;

see

alo Ln. Rv. Sr,rr .AtN.

$14:90(AX1)(a)(2011) (stating that "[gJambling is the intentional conducting, or directly assisting in the conducting, as a business, ofany game, contest, lottery, or contrivance whereby a person risks the loss ofanything ofvalue in order to realize a profit."). See generally Jan Moller, Bill to Legalize )nli'Fantasy' Spor Ganes Dies in

Holse, THn Tlvs-PlcayuNr, May 10, 2010, hrtp://www.nola,com/polirics/index.ssf/20 1 0/05/bill-to-legalize-online_fantas.html. zts See infra notes 219 - 223 and accompanying text. ''" Gaide to Off-Reseruation Gaming, nrzo.a DpR'rt'trq.r oF GAMINc, auailable

at htrp'' I /www.gm.state.az.us/misc-pdf/TopGamingViolations.pdf.
l.

2).o

2012

/ A Sltort Treatie

on Fantasy Sorts and the l-atu

33

ited by Kansas criminal law.""' However, because in thc C<mmission's opinion "chance predominates over skill in fantasy sports leagues," "if a fantasy sports league has a buy-in (no matter what it is called) for its managers and gives a prize, then all three elements of an illegal lottery are satisfied.'222 The language of both the Arizona ancl Kansas websites inclicates that, in those states, CBS Premium fantasy sports games, as well as many of the existing high-stakes fantasy sports competitions, are likely illegal."t

4.

Montana's Alternative Test of Fantasy Sports

Finally, the State of Montana provides a different, and perhaps more insightful, way to test the legality of a particular fantasy sports game."r Under Montana State Code 23-t-802, it is lawful to conduct or participate in a fantasy sports league as long as no wagers take place by either the telephone or internet.2tt The Code further defines "fantasy sports leagues" to include games that meet the following requirements:
any fees for adding or trading players, in cotal, are less than the league entry fee;2'6 the total value of payouts to all league members equals the amount collected for entrance, administrative, and transactions fees, minus payment for administrative expenses;?" and
the administrative fee for conductin g a fantasy sports league, if any, is not more than L5/o of the amount charged as a participant's entrance fee.22E
FreEtently Ated Quetionr, Kansas Racing & Gaming Commission, http:// krgc.ks.gov/index.php2id:42#Fantasy Sports (citing KaN. Srr. ANN. $ 2l-43O3 (\X/est 2011)).

22t

'22 ld, (stating that, "\e do nor argue rhar rhere are some elements of skill involved in fantasy leagues. Particularly, fantasy managers must be knowledgeable of player statistics, and must execute some strategy in selecting the best players for rheir fantasy team. On the other hand, a manager leaves to chance a number of things, including: (l) how a drafted athlete performs in a future event; (2) whether a drafted player is injured; (3) whether the player's actual team in a given week executes a game plan that fits the player's talents; whether the coach calls plays that favor the player; and (4) how opponens ofthe actual player (who may be drafted by another manager) actually play. For those reasons, chance predominates over skill in fantasy sports leagues.). 22) See snpra notes 218 - 222 and accompanying texr.

"1 See infra nores 225 - 231 an accompanying texr. "t MoNr. Cope ANN. g 23-5-802 (2011). $ 23-5-801(3). " 2'?7
23-5-805(1). ,,' $ g 23-5-805(2)(a).

34
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HantardJoat'nal of Sorts & Entertainntent l-au

Vol. 3

applying the Montana State Code to existing fantasy sporrs gamcs, the ESPN and Yahoo! games seem to le free from any liability bccause thcy do not charge entry fees to parcicipants.2'" I{owever, the CBS Sports Prcmium games seem to violate the Montana code because the differencc between the total entry fees charged to participants and the total amor,rnt raicl back to participants in the prize pool exceecls the l5o/o maximrm thrcsh<llcl permissible for administrative fees.'r" The same problem may also apply to some of the other high-stakes fantasy sporrs comperirions.2'l

B.

Fedual Ganbling l-aw

In addition to state gambling laws, fantasy sporrs host sires also may face risks under federal gambling laws. Federal gambling laws serve an important role in preventing individual states from having their anti-gambling laws circumvented by gambling businesses that are based outside of state lines.2r'z rJhile these statutes supplement srare gambling law," they do not create immunity from, or reduce the reach of, any individual state's
laws.tsa

l.

lntersrare Wire Act

of 196l

One federal statute that is relevant to fantasy sports host sites is the Interstate $ire Act of 196l ("tffire Act".'r: The \Wire Act bars "engaging in the business of betting or wagering [through the knowing use ofl a wire communication for the transmission in interstate or foreign commerce.""r'

- 228 and accompanying rexr. vrpra notes 225 - 228 and accompanying rexr. 2)t See sapra notes 225 - 228 and accompanying rexr. 2r2 S Mitchell E. Kilby, Note, Ta Moase that Roared: Imlications of the IVTO Ruling in US - Ganbling, 44 Tnx. INr'r LJ. 233, 240 (2008); see aho Schneider v. United Srates, 459 F.2d 540,542 (9th Cir. 1972) (noting that ")ambling activity conducted in one state may be a federal offense, while rhe same acriviry in another state may not be a federal offense."). 233 .i Vacco v. !orld Inreracrive Gaming Corp., 185 Misc. 2d 852,861 (N.Y. 1999) (discussing ovedap between federal and state gambling law). 18 u.s.c. g to84(c) (1994). '3t 18 U.S.C. $ 1034; see also Kilby, rard. note 232, ar 239 (discussing implications of the tire Act). '3r' 18 U.S.C. $ 10S4(a) (stating rhar rwo elements must be presenr for a violation of the \ire Act: (1) that information transmitred via wire assisted in placing of bets or wagers; and (2) the defendant during such time was engaged in businesses of wagering or becing).
See

22e 2Jo

snpra notes 225

'lr

2012 / A Short Treatise on Fantasy

Sports and the Laut

35

According to at least one court, "wire communications" may inclucle not only telephone communications, but also Internet transactions.'rt Violators of the lVire Act are subject to both fines and imprisonmenr for a peri<lcl of up to two years.238 \yr'hile there are many instances where courts have founcl tl'rat sporcs bookies have violated the \ire Act, there have not yet been any cases that have applied the \ire Act to fantasy sports leagues.'re Nevertheless, if a given fantasy sports website were to develop a commercial fantasy sports game that was deemed to be a "game of chance," then that website would potentially face liability under the \ire Act.2'r('

2.

Illegal Gambling Business Act

A second statute that potentially places fantasy sports host sites at risk of liability is the Illegal Gambling Business Act ("Gambling Act").'a' The Gambling Act, which was passed by Congress in 1970, states that "[w]hoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined not more than $20,000 or imprisoned not more than five years."2'2 According to the Gambling Act, activities of "gambling" include, but are not limited co, "pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries policy, bolita or number games, or selling chances
therein."2ar

In certain respects, the Gambling Act encompasses a broader range of conduct than does the \ire Act.2a{ For example, the Gambling Act prohibits certain gambling activities even if they occur without the use of wire technology.24t Thus, even if a particular courr were ro find a wireless In-

I99 ("To the contrary, the \ire Act, Travel Act and Paraphernalia Act all apply despite the fact that the betting instructions are transmitted from outside the
United Srares ora the Internet,) (emphasis 23' 18 u.s.c. g lo84(a).
added).

'1'

SeeYacco

v. Vorld Interactive Gaming Corp., 185 Misc. 2d 852,860 (N.Y.

"'
'ao
1962).

See,
See

a.g.,

generally United States

Truchinski v. United Srates,393 F.2d627,631 (Sth Cir, 1968). v. Bergland, 2O9 F. Supp. 547, 548 (E.D. \lis.

24' 18 u.s.c. 19i5. $

u.s.c. g 1955(a). '4, 18 u.s.c. g t9t'(bxiii). 'of-o nores 245 - 246 and accompanying "o Stt 2at See L8 U.S.C. 1955. 0

'r'

18

rexr.

36

Hantard Joarnal of Sports

& Enrertainuent l-rttu /

Vol. 3

ternet transaction to lie outside the scope of the \ire Act, the same transaction might fall within the scope of the Gambling Act.'ar' In other respects, however, the Gambling Act's scope is narrower than that of the l(/ire Act.2a7 For example, the Gambling Act only targets "illegal gambling activities of major proportions."2as Thus, the Gambling Act exempts gambling activities that produce less than $2,000 in daily gross revenues.'ae As a result, it is highly unlikely that any fantasy sporcs enterprise that avoids \ire Act liability would meet the threshold for liability under the Gambling Act.2tu

3.

Professional and .A,mateur Sports Protection Act

A third federal statute that could potentially apply to fantasy sports host sites is the Professional and Amateur Sports Protection ,{,ct
("PAPSA".ztr After a successful lobbying effort by the professional sports industry, Congress passed PAPSrq. tn 1992 in response to "growing concerns over state sponsored gambling on sports."ztz PAPSA, in pertinent part, makes it illegal for any private person to operate a wagering scheme based on a competitive game in "which professional or amateur athletes participare."2t3 PrtPSA, however, includes a grandfather clause that exempm previously authorized government sponsored games as well as casino-style wagering from liability.2sa On its face, it may seem that all fantasy sports lie within the scope of PAPSA.2tt However, that would be an absurdity, as r{merica's premier professional sports leagues were the chief lobbyists for P.PSA,2t6 and most

246

I.
See

2a'
2aB

infra notes 248 - 250 and accompanying rexr. United States v. Riehl, 460 F.2d 454, 458 (3 Ctu. 1972).

24e
25o

t8 u.s.c. g l9ii(bxii.
l.

2t' 28 u.s.c. g 37or (t992).

stra no 5, a 78, 28 u.s.c. g 3702<2). '54 S Lee, rtra norc 5, at 78. 2t5 28 u.s.c. g 3702.

"'

"t

S Lee,

256 See Mike Freeman, Congres Totd Sporls Lotteries Threaen Teenag's, Ganns, rVasu. Posr, Jun. 27 , 1991, at B5 (noting the "passionate testimony" in support of P.APS^A by commissioners of Major League Baseball, the National Basketball ssociation and the National Football League).

2012

/ A Short

Treatise on Fantasy Sports and tlte I'aa

31

American professional sports leagues both host ancl enclorsc scasonal fantasy
sports,ttT

is far more likely, however, that PAPSA could be usecl against <laily and weekly fantasy sports games, as these games havc never bcen f<lrmally endorsed by the professional s>orts industry. In aclclition, the subscantial emphasis on buy-ins and payouts in daily fantasy sl)orts games make it morc probable that such games cor.rld be viewed as wagering schemes.""

It

4.

Uniform Internet Gambling Act

Finally, in 2006, Congress passed the Uniform Internet Gambling Enforcement Act ("UIGEA"), which made it illegal for those "engaged in the business of betting or wagering" to "knowingly accept" firncls "in connection with the participation of another person in unlawful Internet gambling."2te The primary purpose of the UIGEA, is to supplement "traditional
[gamblingJ law enforcement mechanisms" and to facilitate tl're regulating of "gambling prohibitions or regulations on the Internet, especially where such

gambling crosses State or national borders."'n"

Pursuant to the UIGEA, the term "unlawful Internet gambling" involves knowingly transmitting a bet or wager, by means of the Internet, where the bet or wager is otherwise illegal under tl're laws of the place where the bet or wager is "initiated, received, or otherwise made'"t6' Thus, if a person located in a state where gambling is illegal places a bet over the Internet, any business that knowingly accepts a financial instrument in connection with that bet, irrespective of the gambling business's location, would unambiguously be violating the act.262 'Whether the Uniform Internet Gambling Enforcement Act applies to certain fantasy sports host sites remains unsettled.2r' On the one hand, the UIGEA includes an explicit carve-out for "fantasy sports games" that meet three criteria: (1) the "value of the prizes is not determined by the number of participants in the game or the amount of fees paid by the participants;"
25' See snpra note 129 and accompanying text (showing that most professional sports leagues even operate their own fantasy sports host sites). 2t8 See 28 U.S.C. $ 3702 (1992).

"e

tl),

31 u.s.c, g i363 eoo6). Interactive Media Entm't & Gaming Ass'n v. ,{tt'y Gen. of U.S., 580 F.3d Ll6 (3d. Cir. 2009). 'o' 3l u,s.c. g 5362(1ox,t).
t6u
262

t6i

Seelnreractive Media Entm't & Gaming Ass'n 580 F.3d See infra nores 264 - 266 and accompanying text.

at

116.

38

Haruard Journal of Sports

& Entertainnent ltu

VoL 3

(2) "[a]ll winning outcomes reflect the relative knowledge and skill of the participants and are determined preclominantly by accumulatecl statistical results of the performance of individuals . . . in mr.rltiple real-world sporting events"; and (3) no winning outcome is based on the outcome of the score of games or on the single performance of an individual athlete in a single, rcalworld event.'6' Nevertheless, it is possible that not all fantasy sports games fulfill this three-part test. For instance, in daily and weekly fantasy games, "winning outcomes [may notJ reflect the relative knowledge and skill of the participants" because the limited duration of these games heightens the importance of luck in game results.rr Further, as a matter of public policy, Congress may not want to provide special protection to short-duration fantasy sports games because the shortened duration of these games may feed
the desires of compulsive and addicted gamblers.'r'

C.

lntellecal Prouty Laws

In addition to the risk of liability under federal and state gambling law, fantasy sports host sites also risk liability under intellectual property laws, including patent law, copyright law, trademark law, and right to publicity
laws.26t

1.

Patent Law

Patent law, in general, relates to technological innovations."'* A patent is a form ofintellectual property protection that is granted by the federal government to an inventor to exclude others from making, using, or selling a particular invention.2('e Modern patent law takes root in Article 1, Section
g t362(ixnXix)(r(rrr) (2006). g 5362(rXEXix) (II). Boswell, silra note 111, at 1272 (noring that, prior to the creation ofshortduration fantasy sports games, fantasy sports leagues may have been viewed as innocuous to society because "these games could only have a substantial negative affect on the crime rate and the economy if every participant were to compete in a great number of fantasy games [and such] an occurrence would be logistically impossible due to the amount of time that it takes to effectively compete in a single
fantasy league.")
261

"'r 3l u.s.c. 3r u.s.c. "'t 2

infra notes 268 - 30J and accompanying text. infra notes 269 - 270 and accompanying text. 2e ,! UNrtrn St:rus PrNr Np TnpraRr OFFIcr, lYhal i a Patenl?,
See
See

268

http://www,uspto.gov/patents/index. jsp (last modifi ed Sep 28, 20 1 I ).

2012 / A Stort

Tretise on Fantasy Sports and tbe l-a.u

39

8 of the U.S. Constitution, which grants the U.S. government the power "to promote the Progress of Science and useful Arts, by securing for limited times to Authors and Inventors the exclusive Right to their respective \7rit-

ings and Discoveries.""n

Courts have held that certain aspects of fantasy sports games are indeecl
patentable.2Tt For example, in Fantasy Sorts Properties, Inc, u, ESPNlStanaaae Partnas, the Federal Circuit found a genuine issue of relevant fact as to whether CBS Sports (F/IIA Sportsline) infringed on a patent relating to "a method of and apparatus for playing a 'fantasy' football game on a com-

puter," whereby players earned "additional points awarded beyond those given in an actual football game for unusual scoring plays, such as when a player scores in manner not typically associated with his position."272 Based on the court's reasoning in Fantsy Sorts Properties, all fantasy sports host sites need to ensure thar their products do not allow users to exploit scoring methods that have already been patented."' l addition, fantasy sporcs games that adopt unusual methods of scoring may wish to seek patent protection for their own methodologies as a way to secure a comparative advantage over competitor host sites."l

2.

Copyright Law
a patent, a copy-

Copyright law, rneanwhile, relates ro content.2Tt Like

right is a form of intellectual property protection grounded in the U.S. Constitution.276 A copyright protects "original works of authorship fixed in a tangible medium of expression."ttt Vhile a copyright covers both published and unpublished works, it does not protect "facts, ideas, systems, or methods of operation."tt" Fantasy sports host sites do not have to worry about copyright issues when publishing player statistics because player statistics are factual in na-

"u

21t

U.S. CoNsr. arr. I, $ 8, cl. 8. Se ixfra notes 272 - 274 and accompanying text.
See

287 F.3d at 1111, 11i4 (Fed. Cir. 2002). sapra notes 271 - 272 ad accompanying text. 214 S sttpra notes 271 - 272 and accompanying text. 275 See infra notes 276 - 278 and accompanying text. "6 See Coyright in General (FAQ), U.S. Copvnrcsr Onrtcr, http:// www. copyrigh t.govlhelp/faqlfaq-general. html (revised J ul. L2, 200 6),
211

212

,r, ,r"

Id.

ld.

40

HaruardJournal of Sports & Ent'tainnent l-tut

Vol. 3

ture, and once published are deemed to lie within the public domain.zTe
Nonetheless, fantasy sports host sites still neecl to ensure that thcir aclditional content, such as stories and illustrations, do not violate anothcr site's copyright.2s(' In addition, if a fantasy sports host site believes anothcr website is violating its copyrighted material, it is imperative for the fantasy host

site to immediately send out a cease-and-desist letter (commonly kn<wn "notice and take down" letter) and to not sit on its rights.?*l

as a

3.

Trademark Law

Trademarks are a third form of intellectr"ral property protection that provides consumers with a sense of certainty about a particular product's source, and allows holders to "develop and control the goodwill associated with a given product."2*2 A federal cause of action for trademark infringement typically accrues under Section 32(l) of the Lanham Act where "a person uses (1) any reproduction . , , of a mark; (2) without the registrant's consent; (3) in commerce;(4) in connection with the sale, offering for sale, distribution or advertising ofany goods; (5) where snch use is likely to cause confusion, or to cause mistake or to deceive."283 Jn addition, some courts have found that, even absent the element of confusion, the Lanham Act prevents both individuals and businesses from capitalizing on the goodwill of
another's trademark.tsr
See C.B.C. Distribution & Markecing Inc. v. Major League Baseball Advanced Media, 505 F.3d 818, 823 (8th Cir. 2007) ("The information used in CBC's fantasy baseball games is all readily available in the public domain."). 28o Cf, Copyright in General (FAQ), sapra note 276.

27e

Joy Butler, Raonding to Stolen Conten, uitb a DMCA Take-Dun l*tter, rg LecnrJuNcre, http://www.guidethroughthelegal jungleblog. com I 2009 I O4lresponding-to-stolen-content-with -a-dmca- take-down - letter.html (intellectual property attorney and Harvard Law School graduate Joy Butler discusses best practices for responding to the use of "stolen content" on the Internet).
See

2st

GuIoa Trnoucn

Bet Mercbandise lVin: The Latu of Non-Tradanarh Manq. SpoRrs L. Rv. 283,284 (2004). "Goodwill" is not an easily defined term. Id, ar 288. However, one court has defined it as "the favorable consideration shown by the purchasing public to goods known to emanate from a particular source." l(/hite Tower Sys. v. \flhite Castle Sys. Of Eating Houses Corp., 90 F.zd 67, 69 (6th Cir. 1937). "t Boston Profl Hockey Ass'n v. Dallas Cap & Emblem Mfg. Inc.,510 F.2d 1004, 1009-10 (5th Cir. 1975). t"I Id. at lOL2-13 (preventing Dallas Cap & Emblem Manufacturing from using NHL team trademarks on apparel); Univ. of Georgia Athletic Ass'n v. Laite,756 F.2d 1135,1547 (Llth Cir. 1985) (preventing a wholesaler of novelry beers from
S

282

Mark A. Kahn, May tbe

Us of Sports Logot, 14

2012

/ A Short

Treatie on Fcrntasy Sorts

anl

tlte

ltut

4t

Sports teams have been one of the more successful parties at using thc courts to prevent the misapprorriation of the go<-rclwill of their marks.'"' Most notably, in Boston Profasional HockE Association u. Dallas Ca & nllant Mannfacturing, the National Flockey l-eagr.re tcanrs convincccl thc U.S. Court of Appeals for the Fifth Circuit that the court shoulcl awarcl traclemark rrotection against the unauthorizecl use of their logos on sl)ortswear ar>arel, even though consumers were not necessarily confisecl about tl'rc aprarel's source or origin.'o6 In that case, the court concluclecl that trademark protection extends to the need to protect "the major commercial vah.re of [sports teams'l emblems lwhich isJ derived from thc efforts of [the teams]."''*t Nevertheless, trademark protection rarely extcncls to the use of another's mark for purposes of non-commercial specch, which is deemecl by the courts to be "fair use."r'r'J While the fine line separating commercial speech from fair use has often been a source of more confusion than clarity,'re the U.S. Court of .Appeals for the Second Circuit currently applies a balancing
using a symbol of an English bulldog wearing a swearer emblazoned with the letter "G" because it appeared too similar to the University of Georgia Bulldogs logo).
28t
See

infra notes 286

t"6

287 and accompanying text.

t Hockey Ass'n.,5L0F.2d at 1012-13 (5rh Cir. 1975). 28' ld, ar l01l; see alo llnia, of Ga. Athletic Ass'n,756 F.2d at 154647 (noting
Boston Prof

that a likelihood of confusion may be demonstrated by showing confusion among

consumers as to the sponsorship of the mark).

ln

Uniaertity of Georgia Athleic Asoci-

ation, rhe Eleventh Circuit upheld the finding of a Lanham Act violation against Battlin' Bulldog Beer for distributing a novelty beer with a logo that strongly resembled the Georgia Bulldog. ld, at 1536-39. According to the court, "confusion stems not from the defendant's unfair competition with the plaintiffs roduc,but from the defendant's misuse of the plaintiffs reputation and good will as embodied in the plaintiffls marks." ld. at 1547 . In addition, no disclaimer can save a parry that misuses the reputation of good will of another's marks because "[o]nly a prohibition of the unauthorized use will sufficiently remedy the wrong." ld.

Tnaoruanrs & MoNopolrrs $22.59 also Atlanta Civil Liberties Union of Georgia v. Miller, 977 F. Supp. 1228, 123), n.6 (N.D.Ga. 1997) ("Congress acknowledged the first amendment problems with banning non-commercial use of trademarks); JA Aparel Cor., 682 F. Supp. 2d ar 309 ("The fair use defense, which allows for some level of confusion, is an absolute defense to claims of trademark infringement, trademark dilution, and false designation of origin."). S generally id, ar 309-10 (citing Car(4th ed.

"t

4 CLv,rr.N oN UNFATR Covprrrlo,,

2}ll);

ee

Freshner Corp.

v.

(holding that a court will

three factors in order to determine "fair use": (1) whether the mark is use descriptively; (2) whether the mark is used to indicate the origin of consumer products; and (3) whether rhe mark is being used in good faith). 28' Conpare Rogers v. Grimaldi, 875 F.2d 994, 999 (2d. Cir. 1989) (using a balancing test to weigh "the public interest in avoiding consumer confusion" against the public interest in free speech) uith Faceda v. NFL Films, Inc., 542 E.3d
assess

S.C. Johnson

&

Sons, Inc., 70 F.3d

267,269 Qd.Cir.

1995))

42

HaruardJournal of Sports t Entatainntent Laut

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test that weighs the public's interest in avoicling consumer confirsion, against the public's interest in free expression.'e" Meanwhile, the U.S. Court of Appeals for the Third Circuit lras expressecl support for a test that places a somewhat stronger burden on the non-traclemark holcling party.'e' Nith lingering disagreement among the circuits about where depreciation of a trademark holder's goodwill ceases ancl fair use bcgins, fantasy sports host sites are best advised to minimize their legal risk under the Lanham Act by avoiding the use of actual sports teams' logos without a liAdditionally, in instances where fantasy sports host sites seek to identifr a professional sports team by name, rhe host site shor,ld either obtain a license, or reference the team's name in small print, while l-raving its own site's name and marks appearing far more conspicuously.2')r
cense.2e2

4.

Right to Publicity

Finally, state "right of publicity" laws govern the use of names and identifying characteristics of famous individuals.'e'r Right of publicity laws are derived from the common law right to privacy, which is grounded in both property law and tort law.2e' Today, publicity rights are defined by Blac's Law Dictionary as "the right to control the use of one's own name, picture, or likeness and to prevent another from using it for commercial benefit without one's consent."2e In addition, according to the Supreme Court, the right of publicity serves as "an economic incentive for [one] to
1007, 1018 (3d. Cir. 2008) adopt the Rogers resr.").
zeo See Rogers
See

("[\l]e

need not reach the issue whether our Court

will

875 F.2d ar 999. 542 F.3d at 1019. notes 288 - 291 and accompanying text. Cf,, rura, "' 2ei See JA A,pparel Corp., 682 F,Supp. 2d at 313-14, 316 (noring that where a company places its own trademark in far larger and more noticeable font than another's trademark, it "arguably removes the likelihood of any confusion"). 2e{ ,1 \illiam Sloan Coats & Kenneth Maikish, The Rigltt of Pablkity: PrEer
2')t
Fdcenda,

of Celebrity Endorsemm, 1025 PLI/Pat 269, 279 (2010) (noting that "[c]urrently, nineteen srates, including California and New York, protect the right ofpublicity via statute . . . an additional twenty-eighr states recognize the right via common law."); see alo C.B.C. Distrib. & Mktg. Inc., 505 F.3d at 822 ("An acioo based on the right of publicity is a srare-law claim."). 2e' See generally Keller v. Electronic Arts Inc., No. C 09-1967 C\X/,,2010 \L 530108, at *3 (N.D. Cal. Feb. 8, 2010) ("The statutory right of publicity complements the common law right of publicity, which arises from the misappropriation tort derived from rhe law of privacy."). 'e6 Blacx's Lv DlcuoNanv (9h ed. 2009).
Licensing

2012

/ A Short Treatise on Fantasy

Sorts and the Latu

43

make the investment requirecl to [perform a skill] of intcrest to tlc public."zqr 'Whether a fantasy sports game's unauthorized use of players' names and statistical information would violate state righr of publicity laws remains an unsettled issue on which the Supreme Corrc has not yet s>oken.'"* The strongest argument that tl'e r.rnlicensed use of players' names ancl statistics in a fantasy sports game violates athletes' publicity rights comes from Gridiron.con u. National Football Players Associatiox, a case in which the U.S. District Court for the Southern District of Florida rejected the argument that a website operator may use players' names and images for the purl)oses of selling football memorabilia and operating a fantasy sports game.'"" By contrast, the strongest argument in favor of a fancasy sports host site's right to use players names and statistics without a license comes from the 2008 case C.B,C, Distribution & Marh,eting Inc. u. Major Leagae Baseball Aduanced Media, in which the U.S. Court of Appeals for the Eighth Circuit held that rhe First Amendment trumps Major League Baseball players' assignable right to publicity in their names and statistics.r"" This split in
2e' Zacchini v. Scripps-Howard Broad. Co.,433 U.S. 562, 576 (1976); see also Haelan Lab. Inc. v. Topps Chewing Gum, Inc., 202 F.3d 866,877 (2d, Cir. l9ti) ("[I]t is common knowledge that many prominent persons far from having their feelings bruised through public exposure of their likeness, would feel sorely deprived if they no longer received money for authorizing advertisements, popularizing their countenances, displayed in newspapers, magazines, busses, trains and subways. This right of publicity would usually yield them no money unless it could be made the subject of an exclusive grant, which barred any other advertiser from using their pictures."). 2e8 See infra nores 299 - 301 and accompanying texr. 2ee 106 F. Supp. 2d 1309,1315 (S.D.FIa.2000) ("Plaintiff actively sought out and obtained over 150 NFL Player's publicity rights, and now argues that the information the websites produce are entitled to Free Speech protection. Plaintiffs argument is not persuasive."). ro0 505 F.3d 818 (8th Cir. 2007). According ro rhe Eighth Circuit view, the First Amendmenr trumped the right of publicity in fantasy sports cases for three reasons. First, the information used in the fantasy baseball games is already in the

public domain. ld. at 823. Second, baseball players whose names appear in these games "are rewarded separately for their labors." Id. at 824 (noting, in separate paragraphs, the athletes' compensation through their salaries and compensation through other endorsement opportunities). Finally, consumers of fantasy products are nor misled by the use of baseball players' names and information into believing the players are endorsing a particular fantasy sports game. Id. at.824, Thereafter, in CBS Interctiue Inc. a. National Footltall Leagte Players Association, the U.S. District Court for the District of Minnesota (a lower court within the Eighth Circuit) held that a fantasy sports host site did not need a license to use National Football League

44

Haruard Journal of Sport t Ettertainntenl l-aut

Vol.

.3

authority has not only led to some confusion for fantasy s1>orts br.rsinesscs, but also potentially invites the practice <f "forum shopping" by plaintiffs.t"' In addition, even if a court were to concltcle that the First Amenclment trumps the right of publicity with respect to tle use of professional athlctes' names and statistics, that same court might rule differently where the fantasy sports game involves college athletes.o2 This is because, unlike profcssional athletes, who "are rewarded separately for their labors,"tt'J collegiate athletes are not otherwise compensated based on their fame.t"' Thus, the American legal system has an especially strong interest in protecting the proprietary nature of the collegiate athlete's right to pr.rblicity.r"'

players' names and statistics in its fantasy football game. See 259 l.R.D. )98,419 (D. Minn. 2009) ("Because the Eighth Circuit's decision in C.B,C. Disn'ilation is controlling, CBS Interactive is entitled to judgment as a matter of law."). t" Eric Goodman, A National ldentity Crii: 'l'le Nd for a llederl Rigbt of J. Pnblicity Stattue,9 DP,rul-LCA J. or Anr & ENr. L. 227 ,244 (199. Absent the creation ofa unified, federal right to publicity, there indeed are a number ofpossible ways that a court could determine which state's right to publicity laws should apply, includinS: (1) the player's domicile; (2) the location where the players union is located; (3) the location of the alleged infringement; or (4) simply the law of the forum. .1e, e.g., Keller, 2010 \L 530108, at *2 (N.D. Cal. Feb. 8, 2010) ("Plaintiff alleges that NCAA violaced his Indiana right of publicity. He argues that Indiana law applies ro NCAA becalse i headqaarters are located in ltdiana and the atlegul uiolaion ocatrred in Indiana.") (emphasis added). It is interesting to note that in the class action suir Keller u. Electronic Arts, the plaintiff class, which brought suit in the U.S. District Court for the Northern District of California, argued not only a breach of California's statutory and common law right to publicity law, but also those of Indiana: presumably based on the belief that Indiana's law, based on its broad pur-

ported applicability, would apply to all class members. Sae Complaint, Keller v. Electronic Arrs, LEXSEE 2009 U.S. Dist. Pleadings 36879I, at *26-27, n I7-28 (May 5,2009).

tu'

See

infra notes 303 - 305 and accompanying rext;

see

Note,

Tebota Dros Back to Pas: Videoganes haue Croed tbe Line, bnt Doe the

ako Chrixian Dennie, Right of

Pnbliciry Protect Smdent-Athhn's Lienes tYhen Balanced Against the First Antendnenl?, 62 Anr.L. Rv. 645, 673 QO ("The fac that student-athletes are not paid may actually work in favor of a student-athlete's argument that he or she is entitled to right-of-publicity protection. "),

r"r See Marc Edelman, Note, Reeualnting Amateurism Standard in Men's College Ba*etball,35 U. Mrcr. J.L. Rrronu 861,862 (2002). t"t See Zacchini, 433 U.S. at 573 (noting "the State's interest in permitting a 'right of publicity'is in protecting the proprietary interest of the individual in his act in part to encourage such entertainment").

rni C.B.C. Disrrib. & Mktg. Inc, 505 F.)d ar 824.

2012

/ A Short

Treatise on Fantasy Sports and the

l-au

45

V.

Lrc,1 Rlsrs Fon Frrasy Sponrs Pnrrrrcrpnrs

\X/hile fantasy sports host sites face numerous legal issues related to their business practices,rt'6 they are not the only stakeholcler group potentially subject to liability for their engagement in fantasy sports."'' Fantasy sports participants also face some degree of legal risk, albeit to a far lesser
extent.30'

A,

Crininal Liability under Ganlling l-aus

Unlike fantasy sports host sites, fantasy league participants have minimal risk of violating federal gambling laws because they are unlikely to be deemed to be "engaged in the business of wagering or gambling."loe Much like the operators of their host sites, however, fantasy sports participants bear some risk, albeit small, of running afoul of states' criminal gambling
statutes. 'u
n

The earliest known criminal lawsuit involving a fantasy sports participant took place in Fort Lauderdale, Florida in 1991, when a local firefighter and fantasy baseball player, Randy Bramos, was charged with a misdemeanor gambling offense for running a l2+eam fantasy baseball league involving $5,000 in league entry fees.j'r These charges, however, were eventually dropped.t'' Since then, there have not been any other instances ofcharges filed against fantasy sports participants.t" to6

npra nores 172 - 305 and accompanying rext. 'o' See infra notes 309 - 359 and accompanying text. \o" See infra notes 309 - 331 and accompanying rext. jne l8 U.S.C. g 1084(a) (1994) (emphasis added); ee aho United Srates v.
See

Becker, 461 F.2d 23O, 232 (2d. Cir. 1972), uacated on other gromds by 417 U.S. 9O3 (L974) (inrernal citations and quotations omitted) (noting that illegal "conduct" under the Illegal Gambling Business Act "does not include the player in an illegal game of chance, nor the person who participates in an illegal gambling activity by placing a bet); Kilby, rura note 232 ar 24041 (noting that the Wire Act only applies ro rhose "engaged in the business of betting" and not ro individual gamblers). B see gen*ally United States v. Crocketr, tl4 F .2d 64, 7 5 (5th Cir. L975) (noting that customers who are in effect partners in the operation of an illegal gambling business are within the scope of the Illegal Gambling Business Act).

\to

rrr

See
S

infra notes 311 - 313 and accompanying text. Skolnick, srra nore 29 at 118.

See id.; ee alo Roben J. Nobile, HuruaN RrsouRcs Gulp $ 5:12.50 (Dec. 2010) ("\hile technically illegal, it is virtually unheard of for someone to get arrested, prosecuted and convicted for taking part in an office pool.").

I, ", rt3

46

HantardJoarnal of Sports t Entertainment l-aw

Vol. 3

B,

Ciail Liability for Ganliling Actiaities

Fantasy sports participants also risk disgorgement of cheir gambling winnings under civil anti-gambling statutes.t''r These civil anti-gambling statutes, which derive from England's 1710 Statute of Queen Anne,"t assert that, as a matter of public policy, a gambling winner "shall not be protected in his unlawful gains," and a gambling loser or gambling informer "may sue to recover back the money lost."rr(' In addition, most states that recognize disgorgement statutes refuse to allow gamblers to opt out of their home state's choice of gambling law.stt This is because states that enforce dis-

gorgemenr statutes are trying to prevent gambling losers from becoming wards of the state due to their risky financial behavior.lt" Although one recent case has held that fantasy sports host sites are

immune from civil liability because they are neither "participants" nor "winners" in gambling activities,re the same conclusion does not necessarily extend to fantasy participants in leagues that, under state law, are deemed to be gambling (meaning those found to involve consideration,
chance, and reward).3'n

C,

Violating Comany Anti-Solicitation Policies

termination of cheir employment

Fantasy sports participants, on a more remote level, also are subject to if found to be soliciting other employees

re Baam, 336 B.R. 649, 657 (Bankr. N.D. Ohio 2008) (noting that do nor enforce anti-gambling contracts will not allow gamblers to uphold these contracts based on out-of-state choice-ofJaw clauses).
See,

So, e.g.,Ga. Code Ann. $ 13-8-3(b) (est 2011); Oslo Rrv. 3763.02 (\esr 2011). 3t5 Hanpbreyt,2007 WL 1797648, ar *3. 'r Hardin v. NBC Universal, lnc., 283 Ga. 477, 478 (2008).
at1

t"

Copr

AN..

e.g.,

In

some courts

t'8 S gnnally trra note 317 ad accompanying text. tte Hxnpbrey,2007 \fL L797648, at x7 (noting that fantasy '(9-LOi s also id. at sports host sites are not winners in a gambling activity but rather are "neutral
parties in the fantasy sporrs games" thar do nor compere for prizes, and are indifferent about who wins the prizes.").
t2o Seegnerallysalamon v.TatBroadcasting Co,,475 N.E.2d 1292, 1297 (Ohio Ct. App. 1984) (noting that Ohio's civil anti-gambling statute gives a stranger to a particular gambling transaction the "right to recover only the money actually lost,

and only from the winner").

2012 / A Sltort Treatie

on Fantasy Sports and the Lata

47

to participate in their fantasy sports games during work hours, in violation of company policy.s'' \X/hile some employers might oppose fantasy sports games based on the lost productivity of workers who spend time looking at their fantasy sports teams during the work duy,"' other employers may disallow soliciting membership in fantasy sports leagues for reasons grounded in labor law."t
According to the Human Resources Handbooh' any employer that seeks to disallow union solicitations in the workplace must, pursuant to the National Labor Relations .A,ct, mainrain a broader, conrenr-neurral ban on solicirations.'24 Such a broad, content-neutral ban would logically extend to fantasy sports.32t For instance, in'Webco lndu$ries, Inc. u, NLRB, the U.S. Court of Appeals for the Tenth Circuit upheld a National Labor Relations Board finding that a no-solicitation policy was "selectively enforced with discriminatory intent" and thus impermissible because a company disallowed employees from soliciting union membership, but allowed employees to solicit each other for "recreational activities (such as sporting event pools, fantasy

football, and baseball leagues)."rzr'

D,

Bankratcy

Finally, even if fantasy spor$ participants are insulated from gambling prosecution under most federal and state laws, high-stakes fantasy sports participants still run a heightened risk of bankruptcy based on their financially risky behavior.J2t One of the reasons why some fantasy sports participants may run a heightened risk of bankruptcy is because, like compulsive poker players and slot machine users, they "get addicted" to the gambling aspects of fantasy sports and gamble incessantly on short-duration fantasy

rtt

Nobile, sara note 3L3.

S

violated the NLRA by discriminaring against the union."). 2t .S Nobile, supra nore 313.
t26
)27

trpra note 58 ar 1698. inra notes 324 - 326 and accompanying text. 12{ .1 Nobile tttra, nate 313 ("Although a company's non-solicitation policy may not be violative of the NLRA, if it selectively enforces this policy by tolerating some solicitation (such as solicitations for office pools, fantasy sports, erc.) but not union solicitation, it will likely - with some limited exceptions - be found to have

r22 Vecchione,

tti

2t7 F.3d t3o6,l3t2 (t0ch cir. 2000).

See

Ix re Baam, 86 B.R. 649 (Bankr. N. D. Ohio Feb 29,2008) (case in which a parties' excessive Internet gambling led to bankruprcy); see also Hancock, supra note 20, at 348 ("Studies show increased debt in areas of legalized gambling.").

48

Hantard Joarnal of Sports t Enrerainntent

lttu,

Vol. 3

sports contests.r2s Indeed, "pathological gambling" is one of the few forms

of addiction currently recognized by the fourth edition of the Diagnostic

and Statistical Manual of Mental Disorders (DSM-IV)."e Other fanmsy sports participants, meanwhile, may wager incessantly on short-duration fantasy sports contests because they suffer from Internet addiction, which "can be a symptom of other mental illness, or conditions like autism.",o Although Internet addiction is not a recognized form of addiction under DSM-IV, Dr. Jerald Block of the Oregon Health Sciences Uni-

Portland notes thar "[aJmong psychiatrists there is general recognition that many patients have difficulty controlling their impulses to chat online, or play cornputer games."r' versity

in

VI. Lcar Rrsrs Fon ANcnmny

liability if their
activities.'r
2

Ferrresy Sponrs Buslr.rssrs

Finally, various ancillary fantasy sporm businesses also may risk legal business owners fail to knowledgably structure business

1.

Fntasy Sports Treasary Sites

Fantasy sports treasury sites bear two forms of potential

liability: suits

from fantasy sports participants for failure to turn over contested winnings, and challenges from a broader range of plaintiffs alleging a Wire Act
violation.3ri

lVhere a fantasy sports treasury site fails to turn over contested winnings to the proper league participant, liability may follow.33a This is because the treasurerarticipant relationship is comparable to one of bank and
328 Fantasy Sporu: A Boning Basiness, ttrd note 53, at BIi c;f. King, rilra ore 5I, at 7 L (Advocates of banning online gaming argue that it "is harmful to minors,

a source or bankruptcy and addiction among adults, and a means for illegal money

laundering.").
3'e Genes Play a Role in Probletn Ganbling, MvapolcroN.cot"t un. 9, 2OlO), http://www.myaddiction.com/news/gambling-addiction-news/genes-play-a-role-in-

problem-gambling. "o Ncholas K. Geranios, Treatment One CIic t a Thne: Ixternet Addiction, CnanrstoN Gzsrr & DaItv Man, Sepr.4,2009,at lA,auailableat 2009ILNR
17614750.

t.

tt'

I.
See See

infra notes 333 infra notes 335 '13 3t1 See infra notes 335

- 359 and accompanying - 338 and accompanying - 336 and accompanying

text. text. text.

2012

/ A Sbort Treatise

on Fanasy Sports and the

lttu

49

in which "the bank is indebted to the customer ancl promiscs to debit his account only at [the customer's] direction.""' Thus, "[i]f the bank pays, on an instrument drawn by its customer, any l)erson otlrer than
customer, the designated payee or a person to whom the instrument is negotiatecl, thc bank's indebtedness to the customer is n<t diminishecl.""n In addition, if a particular fantasy sports game is cleemed to be gambling, there is a remote argument that the affiliated fantasy sports treasury website, in collecting and dispersing firnds, may be founcl to be in violati<ln of the Wire Act.'r7 This is based on the argument that by collecting leagr.re entry fees and distributing prize money over a wired Internet, these treasury sites are "engaging in the business of betting or wagering."r8

B.

Fantasy Sports Adaisors

Fantasy sports advisors, meanwhile, risk liability under both tort law and contract law, if they fail to meet promised standards.r'e Under tort law, fantasy sports advisors risk liability if they negligently supply misinformation that is used in a business transaction, even if that information is not sold directly to the party that suffers a financial loss as a result.''r" For example, Section 552 of the Restatement of Torts describes the tort of "informa-

tion negligently supplied for the guidance of others" as occurring if "[o]ne who in the course of his business or profession supplies information for the guidance of others in their business transactions [and] fails to exercise that care and competence . . . which its recipient is justified in expecting."ra' Under contract law, if a fantasy sports participant purchases advisory services that are not performed as warranted, the fantasy sports participant

ttt

))6 Id.

Cooper v. Union Bank, 9 Cal. 3d 371,377 (197.

$ 10s4(a) (1994). Two elements musr be presenr for a violation of the lVire Act: (1) that information transmitted,via wire assisted in placing of bets or wagers; and (2) the defendant during such time was engaged in businesses ofwagering or betting. Tntchinsi,393 F.2d at 630. e See infra notes 340 - 348 and accompanying text. ttn See genaally Rrs.rR.rvrxr (Frnsr) oF ToRTs 552 (2011) (discussing the tort of "Information Negligently Supplied for the Guidance of Others); ee also Oddi v. Avco Corp.,947 F.2d 257 (7h Cir. 1991) (finding financial advisor liable for an
error in "simple number crunching").

t3' See 'd, ]3t l8 U.s.C.

rrt REsrTvnNr

(Fnsr) or Tonrs $

55

2 (201 1).

50

Haruard Jomnal of Sports

& F.nterhinnenl laut /

VoL 3

may attempt to sue their advisors for breach of an express warranty.r'" In addition, where an advisory service proviclcs aclvice in the f<lrm olan analytical tool, such a tool might be deemecl to bc a "good" under the Uniftrm Commercial Code,'aj and thus the purchaser may sue adclitionally i[the tool fails to meet either an implied warranty of merchantability,'1r <.rr an im>liccl warranty of fitness for a particular purpose.trt Given these contract-law risks, fantasy srorcs advisors are always besr advised to try to minimize their potential liabilities by clrafting clear "clisclaimers."ra6 One of the better disclaimers of liability in the context of fantasy sports advice appears on the Bloomberg Sports website .rncler its Terms and Conditions of Service.'1' This disclaimer requires all uses to "bear all risks associated with the use of such material, inclucling, witl'rott limitation, any reliance on the accumcy, completeness, or usefulness of such material," and to agree that "neither Bloomberg nor its affiliates make any warranty of any kind, express or implied, as to the services or results to le attained . . . [andJ disclaims all express or implied warranties."rr* In many courts such a disclaimer if clear and conspicuous would be deemed valid.

CBS lnc. v. Ziff-Davis Publ. Co.,75 N.Y.2d 496,503 (1990) (defining a contractual warranty as "an assurance by one party to a contract ofthe existence ofa fact upon which the other party may rely"). {i Many courts have held that computer software qualifies as a "good" under Article 2 of the Uniform Commercial Code (UCC) and thus contracts for analytical tools, such as those provided by Bloomberg Sports, will most likely be interpreted based on the UCC, where adopted by the relevant state. See, e.g., Advent Sys., Ltd. v. Unisys Corp., 925 F.2d 670, 67J (3rd Cir. 1991) (finding computer software subject to Article 2 of the UCC because the fact that a computer program "may be copyrightable as intellectual property does not alter the fact that once in the form of a floppy disc or other medium, the program is tangible, moveable and available in the marketplace"); bu see Pearl Invs., LLC v. Standard I/O, Inc,, 257 F. Supp. 2d 326,353 (D. Me. 2003) (If the computer software in question is custom designed, a court may find the predominant purpose of the transaction was the design services). u.c.c. 2-314 (1992).
J

ir2

t16 SeelJ.C.C. $$ 2-316, (noting, in the context of goods, the possibility of disclaiming warranties); Burr v. Sherwin \illiams Co,,268 P.2d 1041,1049 Q954) (If a merchant wishes to do so, he must disclaim warranties in a way that makes it clearly known to the buyer.). rt7 BlooMsRGspoRTs.coM, https://www.bloombergsports.com/frontoffice (click on terms of service) (last visited October 21, 2011). ,1" ld.

r{' u.c.c. 2-315 (1992).

'{'

2012 / A Sltort Treatise on Fnasy

Sports and tlte

Law

5l

C,

Fantasy Sor Insarance

Similarly, fantasy-sports insurance businesses need to ensure that their services are deemed, under state law, to be bona fide insurance contracts and not a disguised form of illegal gambling.]ae Under most state laws, bona

fide insurance contracts must conform to two doctrines: the "doctrine of insurable interest" and the "principle of indemnity."rtu The "doctrine of
insurable interest" requires that any insurance contract involve "some significant relationship between the insured and the person, the object, or the activity that is the subject of an insurance transaction."3tr Thus, in applying the "doctrine of insurable interest," a court will void an insurance contract "where an insurance policy is obtained by a party who has no interest in the subject of the insurance."ltt In addition, the principle of indemnity requires that "the amount of insurance benefits paid when a loss is sustained by an insured party is not to exceed the economic measure of the loss."itr According to one treatise on insurance law, "among the potential evils that were originally regarded as an undesirable consequence of insurance contracts which permitted a net gain by an insured was the prospect that such transactions would be used for gambling."3ta Fantasy sports insurance presents a close call under the "doctrine of insurable risk."3tt On the one hand, sports participants have no direct relationships to the lives or health of the players on their fantasy sports teams.

'nt Robert E. Keeron & {lan I. \7idiss, INsuRa{cs Lav: A Gulnr To FuNpLncr DocrnrNes, lNo Cor'rrarRcar Pn,{crIcES $8.1(a),930 (Student ed., \est Publ. Co., 1988) ("In the United States, administrative regulaMENTAL Pnrucrnrns,

tion ofinsurance
authorities.").

has been and conrinues

to be primarily the responsibilities ofstate

infra notes 351 - 3J4 a accompanying text. Keeton & \7idiss, tlpra note 349, ar. L35-36. "' 3t2 Ruse v. Murual Ben. Life Ins. Co., 26 Barb. 556,561 (N.Y. 1361) (voiding an insurance policy where the party taking the policy has no interest in the life of
See

tto

the insured).
Keeton & \flidiss, sard rlote)49,^t 135 (noting thar ir "is now agenerally accepted fundamental tenet of insurance law that opportunities for net gain to an insured through the receipt of insurance proceeds exceeding a loss should be regarded as inimical to the public interest.").

"'

3t1 Keeron & t(/idiss, silrd. note 349,

at 136- 37 ("[I]nsurance transactions that

appeared to be wagers generally were declared to be illegal in the United States by judicial acrion, even though rhere was usually no basis for these decisions in statu-

tory prohibitions.").
3tr Id. at 135-36.

52

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However, fantasy sports participants seem to have a real financial stake in a property right pertaining to the staristical output of these atlrletes. Fantasy sports insurance also presents some uncertainty r.rncler the "doctrine of indemnity."r6 To meet the requirements of this <loctrine, fantasy sports insurance agencies need to make sure that their ultimate payout never exceeds the difference between the expected winnings <lf a given fantasy sports owner if a parricular player remains healthy throughor.rt the season, and the expected winnings of that same fantasy sports owner given tlre occurrence of the insurable event.

D.

Fantasy Sports Dispute Ilesohtion

Finally, fantasy dispute resolution services face the lowest risk of legal liability among ancillary fantasy sports businesses.tst Any decision provided by a fantasy sports dispute resolution service may be challenged in the courts, on the basis that the dispute arbitrator acted arbitrarily, capriciously, fraudulently, or in violation of public policy.t5* Nevertheless, the conrts will probably look favorably upon fantasy sports dispute resolution services because these services not only allow courts to avoid using their limited resources on resolving fantasy sports disputes, but also allow courts to avoid "becomling] marred down in what has been called the 'dismal swamp"' of a particular private association's rules.ite

VII.
\hen

Corqcrusro,

Daniel Okrent hosted the inaugural Rotisserie League baseball

draft in April 1980, there was little need for him to consider how legal risks applied to his "goofy" comperirion.i6u However, with the fantasy sports industry today valued at $5 billion, an understanding of the legal risks that apply to fantasy sports games has become imperative.

it "is now a generally accepted fundamental tenet of insurance law that opportunities for net gain to an insured through the receipt of insurance proceeds exceeding
interest.").
137
See See,

tt(' Id. (oting thar

a loss should be

regarded as inimical

to the public

t'"
ac *7

infra notes 358

359 and accompanying text.

e.g,, Aviles v. Charles Schwab

& Co., 2010 VlL 1433369 (S.D.Fla 2010),

(discussing grounds for challenging a neutral arbitrator's decision both under the Federal Arbitration ,tct and under common law).

]te Crouch v. National ,{ss'n for Stock Car ,{uto Racing, 845 E.2d 397,403 Q. Cir. 1988).
160

Townsend, silra note 25,

at

LC.

2012

/ A Short

Treatise on Fantasy Sports and tlte Laut

t3

For fantasy sports host sites, one source of lcgal risk emcrges from U.S. gambling laws. \lhile there are few corrt opinions that aclclress lrorv gambling laws apply to fantasy srorts host sites, host sites can nevertheless minimize their potential liability uncler gambling laws by structr.rring contests in a way that either (1) does not awarcl prizes or (2) allocates players thr<-rugh a "traditional auction," and lasts for at least a frrll professional sports season. Another source of legal risk comes from intellcctual 1>roperty laws. Host sites can minimize their intellectual propcrcy risks by ensuring tlrat their game scoring systems do not infringe on existing patents and that their written and illustrated content does not infringe on existing copyrights, as well as by obtaining licenses from the requisite players associations before using player names in their games, and obtaining licenses from the requisite sports leagues before using individual team trademarks. For fantasy sports participants, the main sorrce of legal risk entails the possible disgorgement of fantasy winnings under Queen Anne statutes, which disallow winners in gambling contests from keepin g prize money. Fantasy sports participants should avoid competing in high-stakes fantasy leagues in states that maintain Queen Anne statutes. Fantasy sports participants are also at a potentially heightened risk of unemployment and bankruptcy. Thus, fantasy sports parcicipants should familiarize themselves with workplace policies related to participating and soliciting participation in fantasy sports leagues, as well as with how, if at all, fantasy sports entry fees would compromise their personal finances. For ancillary fantasy sports businesses, their main legal risks relate to gambling laws, as well as traditional contract and tort law. Specificlly, fantasy sports treasury sites risk liability if they fail to properly turn over winnings or they collect and dispense funds in a way that violates the r(/ire Act. Fantasy sports advisory sites risk liability under both tort and contract law if their websites make inaccurate representations about their services. Fantasy sports insurance businesses risk liability under gambling law if their insurance policies are found to not serve a legitimate purpose of insurance, but rather to be a disguise for illegal gambling. Meanwhile, fantasy sports dispute resolution businesses run the risk of having their arbitration deci-

in federal court. Recognizing all of rhese legal risks, it is no longer fair to view fantasy sports as simply a "tongue-in-cheek exercise."r6t However, for the many professional sports fans who wanted to experience a true simulation of the professional sports marketplace, they now have it: legal risks and all.
sions challenged

t6' v/alker, ttpra note 5, at lD.